Decentralized finance is the concept underlying cryptocurrencies and it is a big shift away from the way we currently handle money. Power is taken away from institutions like banks and it relies instead on blockchain technology.

Whether crypto will eventually power entire financial systems, government departments, registries, etc. remains to be seen but the future looks bright with the demand for crypto growing significantly over the past decade. Bitcoin was the first crypto and is continuing today, stronger than ever.

It’s become easier to buy, sell, and pay with crypto

Popular consumer fintech apps are making it easier to buy, sell, and pay with crypto. What’s essential in the process of buying crypto isn’t just the purchase but how to store digital assets. According to daytradingz.com, finding the best crypto wallet usually depends on each person’s needs and goals. For example, software wallets are intuitive and easy to use so they are best for beginners.

Crypto is a digital store of value

One of the easy-to-understand use cases of crypto is as a digital store of value. That is something investors want in the current market environment. They are searching for inflation hedges due to unprecedented amounts of money being printed by central banks. This leads to inflation and devaluing of current funds.

Over the next few years, other use cases are likely to become prevalent, especially as Paypal and other large platforms enable merchants to accept crypto as a means of payment.

Crypto removes centralized authority

With a traditional centralized institution, someone has control over transactions and balances. Ideally, those in control act in the interests of customers but this isn’t always the case. Alternative financial systems using public blockchains and advancements in custody have played a role in driving demand.

As transactions are carried out through blockchain, there is no way to refuse payments to or from a specific person or to freeze or seize funds. This is often given as a reason why illegal and criminal activity can flourish, but just because a transaction is hidden doesn’t mean criminality is present.

Removing centralized authority from financial equations deals with many practical problems. For example, it is possible to offer services 24/7 with no restrictions.

A shift to proof-of-stake mining

Energy consumption for mining is a critical side effect of maintaining the security of the network and is not ideal from an environmental perspective. This has been one of the drawbacks to adoption.

A response to this from the crypto ecosystem has been to shift to proof-of-stake mining, which is far less energy-intensive. Proof-of-work rewards miners for solving complex equations, whereas proof-of-stake rewards miners in a different way that’s less risky. PoS is a significant element of contemporary blockchain architecture that provides efficiency in a cost-effective way.

Continued innovations

One of the main reasons to be hopeful about the future of crypto is the continued innovations. Ongoing projects in many areas could provide more services through decentralized finance in the future. More than just offering more convenient transactions, one day, crypto may provide any and all financial services.

One innovation is the ability to use tokens to build new communities and incentivize adoption. Yield farming is an innovative lending activity whereby someone with crypto assets can lend them to someone else to generate profit. Yield farming can help to create a liquid market with active lenders and borrowers.

Non-fungible tokens that are unique and not interchangeable are another innovation. With some of the new platforms, it is possible to assemble digital collections. For instance, you can have a collection of digitally unique artworks.

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