While decentralized finance is still a relatively new technology, the possibilities are limitless. Decentralized Finance, referred to as DeFi, is a global financial technology which removes the need for traditional infrastructures such as banks, intermediaries, or brokerage firms. It allows for users to act as their own digital bank, equalling a lot more freedom and flexibility in comparison to traditional finance. With businesses looking for more effective ways to manage finances, DeFi has been an effective solution. With the recession looming, and businesses pivoting to change strategies during this time, the use for DeFi has been particularly relevant in the acquisition process. 

DeFi uses digital assets and blockchain technology to empower users to conduct and manage their own financial operations. Blockchain technology refers to a shared online public ledger which facilitates and tracks transactions within a network. This can be used personally, and also for businesses. The decentralized finance world is made up of a multitude of non-custodial financial products, built on the blockchain. ‘Non-custodial’ means that project teams don’t manage your money on your behalf. Unlike, say, depositing your money in a bank or a centralized institution where clients lose custody of their assets. With DeFi protocols you always maintain ownership and control over your digital assets.

What can DeFi offer that centralized finance (CeFi) cannot?

Centralized finance can be considered a more traditional style of finance by some. While CeFi can use blockchain tech, the infrastructure around asset ownership has been in place for decades. While this has served us well, it doesn’t take into account our modern needs, such as transparency, flexibility, speed, and security. What happens with your money is often unclear and once you’ve started using a CeFi product, your assets are, de facto, no longer your assets. They belong to the centralized entity whom you’ve entrusted your assets with. Thus, you are exposed to various risks from asset mismanagement to bankruptcy – cases in which access to your assets can be completely cut off at their discretion.

The need for a third party, or a middleman, is integral to CeFI, however, not for DeFi. DeFi was designed with quick and instantaneous transactions in mind. While some CeFi products offer this, DeFi can completely remove the possibility of human error. DeFi also allows for 24/7 access and transactions, meaning that regardless of what time, or where you are in the world, you still have full accessibility. This also addresses issues such as underserviced banking areas. Many regions still don’t offer the same banking services in comparison to others. DeFi gives people from all walks of life the opportunity to choose how they use and store their assets. All these factors also mean that DeFi is a cheaper alternative to banks whilst also being more secure.

How does this positively affect the acquisition process?

First and foremost, Smart Contracts allow for easy management of any agreements. A smart contract is run on the blockchain meaning that it’s fully automated and controlled. These contracts are thus more efficient as there are no middlemen involved, also meaning no delays, and no insecurities. As they’re run on code, whatever financial operation you can think of is no longer manually managed but rather “forced” by the code to automatically fulfill its intended purpose. Whether this is sending/receiving assets, making payments, exchanging from one currency to another etc. As a result, there’s no room for human error, long waiting times, paperwork or mal-intended mismanagement. 

While assets refer to several types of things that hold value, and while we assume that this is tangible monetary, many businesses hold other types of assets which don’t have the same liquidity as cash or crypto. Dealing with different assets requires assessments, agreements, and legalities which take time. Ensuring that all types of assets are dealt with equally with assurance can be achieved through DeFi. DeFi works with all types of assets & some innovative projects can help you transfer or exchange them across different blockchains, meaning more overall liquidity. This allows for easy management, easy access, and easy overviews while guaranteeing you get good prices and low fees.

Trading also plays a role in this. While acquisitions are often reflected in the stocks of both parties, DeFi still provides income opportunities (both passive and active) during this time. The big difference in regards to passive income generation is that the returns on your “deposits” are way higher than what any bank would ever offer. For example we offer a 12.7% yearly yield on $USDT ( a version of the digital dollar). Day trading on the other hand can be a riskier way of deriving profit since – like in the case of stock trading – you need to have some solid info, a degree of experience and acquired trading skills.  When planning for this, the acquisition period can be a time in which you can still gain assets and manage risk.

Although these are a few of the many capabilities that DeFi can offer, the finance industry is still stuck in its ways with a hesitancy to explore new technologies. With the DeFi industry becoming more popular and commonplace, it’s worth looking into how businesses can use this tool to aid in the acquisition process. Not only does it save money, but it saves time, effort, and increases overall stability while reducing risk. While it seems daunting to those of us new to this style of finance, it actually allows you to make more informed and transparent decisions. It also records all transactions on the blockchain, meaning it’s easy to manage. DeFi offers a solution to problems we’ve been facing for years. Being dissatisfied with your finance provider should not be the norm. Look into DeFi, see what the industry can offer, and use it according to your needs. You’ll find it’s much easier to use with truly limitless possibilities.