Decentralised Finance and Its Use case
Let's dedicate this page to understand Decentralised Finance (DeFi) and its use case.
First let's understand basics of decentralised finance.
Decentralised finance, often shortened to "DeFi", is a financial system that is built on top of a blockchain network such as ETH or BSC. It allows for the creation of financial applications and services that are not controlled by a single entity, such as a bank or government. This means that users can access financial services directly, without the need for intermediaries, and have more control over their own assets. DeFi has the potential to make financial services more accessible and efficient, particularly for those who may not have access to traditional financial institutions.
Decentralised finance has the potential to enable a wide range of financial applications and services. Some potential use cases for DeFi include:
- Lending and borrowing: DeFi protocols can enable peer-to-peer lending and borrowing, allowing users to access credit without the need for a traditional bank.
- Asset management: DeFi protocols can enable users to manage and trade assets, such as stocks and commodities, directly on the blockchain.
- Payments and transfers: DeFi protocols can enable users to make payments and transfers using cryptocurrencies, providing an alternative to traditional payment networks.
- Insurance: DeFi protocols can enable users to create and access insurance products, such as smart contract-based policies that automatically pay out when certain conditions are met.
- Predictive markets: DeFi protocols can enable the creation of predictive markets, where users can buy and sell shares in the outcome of future events.
- Identity management: DeFi protocols can enable users to manage and control their own digital identity, allowing them to access services and prove their identity without the need for a central authority.
- Governance: DeFi protocols can enable decentralised governance, allowing users to make decisions about the protocol and its future direction through voting and other mechanisms.
These are just a few examples of the potential use cases for DeFi. As the technology continues to develop, new and innovative applications are likely to emerge.
Now, we can clearly see from the above use cases that DeFI is truly connecting people without any middleman. When we think DeFi in $REWARD context, some of the very clear use cases are payment and transfers, predictive marketing, and asset management etc. More information on $REWARD use case can be found in other sections of the document.
Now, let's understand a basic definition of negative tax in our traditional world. A negative tax is a type of tax system in which people who earn below a certain threshold receive a payment from the government instead of having to pay taxes. The payment is meant to supplement their income and bring them up to the threshold where they would have to start paying taxes. This is intended to provide a safety net for people with low incomes and to help reduce poverty.