Developments are being made that will change the banking and financial system as we know it. The future of finance and banking won’t be able to ignore the technological advancements achieved by Defi! The financial institutions will eventually be left with a choice to either adapt or be left behind as finance changes right before our very eyes. This has proven to be the case with many accomplishments of internet banking. It’s become rarity for the average consumer to have to visit a bank in person. Technology makes banking easily done online or even virtually.

This all brings the question to the forefront, what is Defi? Defi is a decentralized way of finance. It makes financial products available to anyone without the need of a middleman. Defi doesn’t require identification, social, proof of address or credit check. It eliminates many forms of verification as we know it. Some may think at first this is a dangerous way to do business and I’ve always trusted a third party to handle my finances. Defi will make you think outside the traditional way of doing finance and introduce you to a world of smart contracts.

In 1994 Nick Szabo introduced the world to smarts contracts as a way to widen the functions related to point of sale. Smart contracts make Defi possible by writing a agreement between the buyer and seller that’s executable, trackable and irreversible. For example: You’re the buyer of a car at a dealership. You and the seller can agree to a smart contract that outlines all the terms and conditions such as price, warranty, taxes and so forth which is digitally recorded on the blockchain. Once you the buyer completes the terms of the contract the goods will be released to you. If the seller doesn’t fulfill their end of the contract then what was agreed upon is returned to you. Vice Versa once both obligations on both sides are completed the executable actions happen. You the buyer receive the vehicle and the seller receives the compensation outlined in the smart contract. This process is immutable and distributed meaning that it’s impossible for anyone after the contract has been made to alter the original contract. This entire process is done without the need of a legal or central authority. Therefore smart contracts are the heart of Defi and will have a huge impact on the financial system in the years to come.

Altcoins are simply any other coin than Bitcoin. Hence the word altcoin is a combination of two words Alt and coin. Alternative and coin. New altcoins are popping up all the time. When the Bull Run officially happens the next time around one of the key signs will be many kinds of altcoins being advertised as the fast way to make you a millionaire but the truth of the matter is that many of these altcoins will disappear and only the ones with purpose will last. The altcoins that have purpose will dominate in the crypto market. Early investors in these coins lives will be changed by their wildest dreams and witness enormous gains. Altcoins can also be an risky investment because of big traders affecting heavy price swings. This also draws the attention of many investors because of the huge upside potential as well.

As of March 2021 there are 9,000 cryptos and 40% of that number are Altcoins. The types of altcoins can vary from mining based, stablecoins, security and utility tokens. Some altcoins aspire to become the next Bitcoin as an inexpensive alternative. Altcoins and Bitcoin have several differences though. One main difference between the two is that Bitcoin uses the proof of work to validate transactions and the ability to use smart contracts are limited. Bitcoin has also been in much debate for being a huge energy consumer and for leaving a large carbon footprint. In comparison many Altcoins use proof of stake to validate transactions. This means instead of using energy to mine blocks the power depends on how many coins the miner holds. The more coins equals more power in the case of proof of stake. Proof of Stake has its many benefits as one famous crypto named Ethereum wishes to move from Proof of Work to Proof of Stake in 2021.

When it comes to crypto the first thing that comes to people’s mind is Bitcoin. It has been the pioneer of blockchain technology since 2009. It has surpassed anyone’s expectations from being valued at 30 cents to hitting an all time high of just shy of 65k. The controversy behind Bitcoin and the sheer profit involved has intrigued millions and has paved the way for crypto adoption. Young millionaire’s have been made from those who bought in early. Many didn’t take this investment serious and some assets were lost in a numerous of different way. Laptops were thrown away with the private keys on them, passwords have been forgotten and the list goes on. One of the most notorious headlines is we’re a pizza was bought for 10,000 Bitcoins on May 22, 2010. That pizza was very pricy because those same Bitcoins are worth 80 million US dollars today. That leads us into we’re does Bitcoins value come from and who created Bitcoin? In 2009 the mysterious Satoshi Nakamoto completed the first peer to peer transaction with Hal Finney. The purpose was to create a peer to peer decentralized network that didn’t need a third party like a central bank. Currency would change forever with this creation of this proof of work concept. Along with this creation a code was set for there to only to ever be 21 million Bitcoin in circulation. This greatly increased Bitcoin value because of supply and demand. The idea behind proof of work is that evidence can be shown that computational power has been used to solve complexed mathematical problems to confirm transactions and create new blocks. This concept has risen concerns about bitcoins carbon footprint. These claims can vary and will take a careful look at all the analytical data to make a true statement in this regard.

Bitcoins are mined in a reward process in places like Iceland were cooling Artic air is free. A lot of mining is also done in China where electricity is subsidized by the government. Bitcoin over the years has gone strong against all odds and given the pros and cons Bitcoin has remained the leader in the crypto world. When it comes to investments it has also been considered to have the greatest impact in the asset class when compared to conventional cash and gold.

Stablecoins have security, privacy and are free from volatility. Stablecoins aim to stay at a fixed amount equal to one US dollar. Their goal is to give the crypto market stability and increase adoption of digital assets. Many investors will store profits of their funds in a stablecoin to avoid price swings in the crypto market. Basically stablecoins can be compared to holding funds in a personal bank account that can avoid volatility and also gain interest over time.

In fiat currency price stability happens because the reserves backs this currency with underlying assets such as gold or forex reserves which act as collateral to maintain stability. This luxury of stability the majority of cryptos don’t have. There is no central authority that can jump in and save the crypto market from drastically going up or down. This is we’re stablecoins come into the picture an attempt to match the value of one US dollar. The first stablecoin was introduced on July 21, 2014 named BitUSD. It was the creation of two big figures in crypto, Charles Hoskinson and Dan Larimer. The story of fame to glory for BitUSD ended in an unfortunate fashion with it losing its parity to the US dollar and is now priced around 80 cents. This wasn’t the only stablecoin to lose its value over years, others came and went over time. Then in 2015 a stablecoin named Tether was introduced with the concept of a collaterized off-chain backed by dollar deposits and real assets. Tether became a game changer in the growth of stablecoins and is still widely used today. Facebook and many others have had talks of introducing their very own stablecoin. Stablecoins can’t go without mentioning Libra which was unveiled on June 18, 2019 and had big plans of being called the Internet of Money but has been held back because concerns from central banks and lawmakers. At the present time we have three types of stablecoins. Collateralized on-chain, Collateralized off-chain and non-collateralized. The differences between the three are pretty straightforward. Collateralized on-chain value is backed by cryptocurrencies, Collateralized off-chain are backed by real-world assets and non-collateralized are backed by smart contracts to keep stability.

Stablecoins can have many benefits which include; long term store of value, loans, recurring payments and the list goes on. Today we have many popular stablecoins such as Tether, USD Coin, Gemini Dollar and Dai Token. All these stablecoins have key benefits and it’s recommended to take a further look at the features of each. There have been talks of a global digital coin that would be the standard for stablecoins and provide a connection to all people on many platforms. The future of digital assets appear to be standing the test of time and could have mainstream adoption before we know it.