DeFi platform and the future of fractional investment in India

DeFi or decentralized finance is right now among the fastest growing and most innovative sectors of the financial world. Over $230 billion worth of assets are locked in the DeFi market as of October 2021. The reason for its sudden popularity is because of the much-advanced security and transparency it unlocks compared to traditional financial services.

DeFi platforms are secured via blockchain technology and transactions do not need to go through a bank, brokerage, or other centralized institution. Instead, it is grounded on creating a decentralized and autonomous system, for a full range of financial services including everyday banking to loans & mortgages to trading.

Why is this the future?

DeFi is a true innovation that is set to revolutionize the financial world and will be difficult to miss its widespread adoption. It’s scalable because of its applicability in virtually every aspect of the financial system, and it offers a lot of benefits over traditional financial systems. Let’s dive into the biggest benefits

Democratic

As the name suggests, “Decentralization” is the core tenet of DeFi platforms. They eliminate the involvement of corporations or institutions, thereby reducing dependency on their bureaucratic policies or any human oversight or data storage issues.

This allows increased participation without limitations of loan approvals or credit rating, making it truly democratic. Users set the rules of the game and they are empowered by getting access to all relevant information.

Operate on smart contracts

"Smart Contracts" are programs stored on the blockchain which are executed if some predetermined conditions are met. Simply put, they are if/when, then conditions - certain actions are executed automatically only if/when the defined conditions are fulfilled.

An easy example is, in a real estate transaction, a buyer automatically gets the title papers, but only if they pay the defined amount, thereby protecting both buyer’s and seller’s interest.

DeFi platforms are built on these smart contract enriched blockchains, which means that without any time loss or human intervention, a financial function can be automated on the fulfillment of certain conditions. This makes these transactions very secure and eliminates any chance of manipulation or fraud.

Completely transparent

All codes, data, and transactions are publicly available to everyone’s access since these transactions are processed on blockchain. This allows a much higher level of trust - you can view and understand the kind of transactions that occur on-chain, as well as the smart contract’s code and functionality.

Tokenization is the future of real estate

One of the very important applications of DeFi is tokenization of assets. The concept of crowdfunding is already a worldwide success. The sharing economy or crowdfunding applications have helped us share human and physical resources much more efficiently, like fund development projects, or collect and disseminate critical information quickly.

This allowed innovation in a lot of industries led by companies like Uber, Airbnb etc. The sharing economy facilitates high growth in a sustainable, scalable, and efficient way.

This article has been written by Ankur Grover, co-founder and CTO, Frxnl.