In a new series, we are going to explore the world of DeFi and cryptocurrency. First up, we will take a look at Scarface Finance but let’s give a little bit of background to what is DeFi.
What is DeFi?
The traditional financial sector (also known as TradFi) relies on KYC—know your customer—which refers to processes that banks use to verify a customer’s identity and legality before doing business with them. In other words, a client must show that they are who they claim to be.
If you want to borrow money from a bank, you’ll need a credit check, documentation of your identity, and, in most cases, some sort of income verification. However, with DeFi, a consumer’s personal information and identity may often be hidden. The most important thing is usually digital assets.
Instead of dealing with banks, DeFi participants use a “smart contract,” which is computer code that serves as the go-between to guarantee that everyone keeps their promises.
Aside from identifying customers, many conventional banks demand a minimum deposit of $25 to $100 when opening a savings account. In addition, most savings accounts have a minimum balance fee or monthly maintenance fee.
DeFi differs in part because there are so few hurdles to overcome. A DeFi application, such as Compound, a project on the Ethereum blockchain that specializes on loans, or Yearn Finance, a project that focuses on lending and trading cryptocurrencies, just requires a crypto wallet and access to the internet. And there is frequently no minimum investment requirement.
You may get started with DeFi apps by creating a cryptowallet with companies like Metamask or Frame and buying some cryptocurrency.
Why is it Important to Pay Attention to DeFi?
The champions of DeFi say that it is a fundamental shift in the ways people interact with finance, and expands access to that world to anyone who wants to join.
But critics claim that because of a lack of regulation, the industry is dangerous and prone to frauds. In 2021, more than $10 billion in DeFi applications was stolen. DeFi apps have also become a more popular tool for money laundering—criminals used them to launder about 8.6 billion dollars last year, according on Chainalysis.
In mid-June, the Acting U.S. Comptroller of the Currency Michael…
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