Decentralized finance leverages key principles of the Ethereum blockchain to increase financial transparency for EdTech startups
Decentralized finance or popularly known as DeFi facilitates allows EdTech startups to secure an environment enabled by blockchain technology. DeFi is best known for providing financial transparency as third parties in financial transactions have resulted in a lack of confidence with miscellaneous transfers or transactions in many instances.
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How Decentralized finance (DeFi) will disrupt the aspects of current financial systems:
- Legacy Economic Systems Perpetuate and Exacerbate Inequality
- Defi gives unbanked access to the financial system as it eliminates manipulation and favoritism. Defi ensures equal opportunity as projects are financed based on the quality of ideas and the soundness of execution plans and not by other factors induced by middlemen.
- Inequality limits growth when good ideas are not financed. DeFi has laid the groundwork for cryptocurrency to realize universal access to a financial system uncorrupted by corporations and governments.
- The functionality of exchange is organizing trade in different assets, like stocks or foreign currencies, between market participants. The emergence of decentralized exchanges (DEX) means that holders of cryptocurrencies no longer have to leave the crypto space to swap their tokens. Uniswap is a prominent example of a DEX.
How do EdTech startups are benefited from Decentralized Finance?
Decentralized finance leverages key principles of the Ethereum blockchain to increase financial security and transparency for EdTech startups, unlock liquidity and growth opportunities, and support an integrated and standardized economic system.
- Programmability. Highly programmable smart contracts automate execution for EdTech startups and enable the creation of new financial instruments and digital assets.
- Immutability. Tamper-proof data coordination across a blockchain’s decentralized architecture allows EdTech startups to increase security and audibility.
- Interoperability. Ethereum’s composable programming stack guarantees that DeFi protocols and applications are worked to incorporate and supplement each other. With DeFi, designers and item groups have the adaptability to expand on top of existing conventions, alter interfaces, and incorporate outsider applications. Hence, individuals frequently refer to DeFi protocols as “money legos.”
- Transparency. On the public Ethereum blockchain, every transaction is communicated to and confirmed by different clients on the network (note: Ethereum addresses are encrypted keys that are pseudo-anonymous). This level of transparency around transaction data not only allows for rich data analysis but also ensures that network activity is available to any user. Ethereum and the DeFi protocols running on it are also built with open source code that is available for anyone to view, audit, and build upon.
- Permissionless. Not at all like traditional finance, DeFi is defined by its open, permissionless access: anyone with a crypto wallet and an Internet connection, no matter what their geography and often without any minimum amount of funds required, can access DeFi applications built on Ethereum.
- Self-Custody. By using Web3 wallets like MetaMask to interact with permissionless financial applications and protocols, DeFi market participants always keep custody of their assets and control of their personal data.