Decentralized finance, in a nutshell, promises transparency and offers beneficial terms for borrowers. DeFi platforms are supposed to build an alternative financial system for offering/receiving loans, exchanging currencies, making payments, etc. There are no banks, brokers or trusted third parties, governments are not involved, and finally, notorious middlemen are eliminated. There is just secure, transparent software.
DeFi allows borrowers to take hassle-free loans: You don’t have to worry about bank account creation, lengthy application reviews or paperwork. For crypto holders, DeFi offers an opportunity to lend their assets to other users, thus earning a profit of about 20%. Decentralized exchanges often act as custodians of funds, thus eliminating that annoying middleman again. This is how DeFi should work and probably will work someday. And what follows is the actual current situation.
What’s wrong with DeFi in its current state
Decentralization is a very lucrative word. The philosophy behind it is rather romantic, or in more honest terms, utopian: a