Traditional vs. Decentralized Finance: a Jenco Analysis Report
What is Traditional Finance? Traditional finance uses a centralized authority that maintains distinct currency values across nations. Banks and other financial institutions enable monetary transactions using uniform values that may change, depending on the present GDP (Gross Domestic Product) of the different nations whose currencies are used in particular exchanges. For instance, if the current exchange rate is 1 USD is 0.76 GBP, then all monetary exchanges are based on this present value. Currency values change depending on the time frame and location.
What is Decentralized Finance? In contrast, decentralized finance (DeFi) does not use a centralized authority to maintain currency values across nations. Due to the inequalities observed across the different financial systems worldwide, the necessity of enabling convenient cross-country or cross-currency exchanges was developed.