Future Of Decentralized Finance And How Building A Bitcoin Wallet Could Be A Viable Business Idea
The world of decentralized finance first came into being in 2009 when an anonymous user with the alias Satoshi Nakamoto proposed the idea of a digital currency, called Bitcoin, which relied on cryptography and blockchain.
At the time, Bitcoin could not even get you a pizza, but today, a single Bitcoin is worth more than an average American car!
However, the wave of decentralized finance did not begin until late 2015, when the Ethereum network took the world by storm with its smart contract feature and token – Ether. Since then, several altcoins came into existence, each with a unique purpose and smart contract.
The success of cryptocurrencies can be attributed to their decentralized and transparent nature. With no central body to govern, control or regulate crypto tokens, the internet and the blockchain make it effortless and inexpensive to transfer money.
Fast forward to 2021, and several private companies have begun to accept cryptocurrency as a form of payment for products and services.
With the perpetual rise of cryptocurrencies and widespread acceptance of crypto tokens, we seem to be entering a world of finance that is decentralized.That begs the question, what is next in DeFi?
Is it a momentary hype or an evolution of money? How can the average person leverage the power of Bitcoin wallet as a business model?
What Is DeFi?
DeFi stands for “Decentralized Finance”.
As mentioned earlier, all of our money (dollars, rupees, and more) is currently regulated by financial institutions. Hence, there is a disproportionately distributed amount of power and control to a single entity, i.e., the financial institution or the government.
Furthermore, transferring money from one person to another involves dozens of middlemen, each of whom has its own fee. That results in heavy losses for the average joe.
Bitcoin was a solution that set out to solve this problem. It is not controlled by any bank, can be transferred to anybody via the internet for almost zero cost.
However, circulating money is not the only aspect of a financial system. Other building blocks of the financial system include lending, borrowing, saving plans, insurance plans, equity, trading, and more!
DeFi refers to the conglomeration of all the financial services that are decentralized (have no central authority). To establish a decentralized financial system, creating infrastructure from the ground up is critical. That is where the Ethereum network changes the game.
In short, Ethereum is a platform that allows anybody on the blockchain to develop and deploy decentralized applications (Dapps) by writing code (popularly called “Smart Contracts”).
For perspective, you can even create a job search site on the blockchain using Ethereum!
Where Is DeFi Headed In The Future?
Firstly, time is a testament to the fact that the financial industry is on a continual rise in terms of global GDP percentage.
In the United States alone, finance, insurance, real estate, and rental sectors made up over 20% of the GDP in 2017 – a twofold increase compared to 7 decades prior.
Secondly, with the rapid evolution of technology, more people are investing a larger amount in fintech, thus accelerating its maturity.
Lastly, the result of rapid fintech development is now paving the way for DeFi to take over the world with pre-existing infrastructure, incredibly low transaction fees, and lightning-fast processing speeds!
One of the most evident innovations of DeFi is the tokenization of real-world assets. Non-Fungible Tokens (NFTs) are an excellent example of this.
Real-world items, like art, can have a counterpart on the blockchain in the form of tokens. The value of these tokens is largely based on their underlying smart contracts or their scarcity.
USDC is another example of tokenization. One USDC is equivalent to one US dollar.
Staking Cryptocurrencies Or Proof Of Stake
Similar to how you would lock up large sums of money in a bank and earn extra money as interest after a period of time, cryptocurrencies can also be locked up or “staked” to accumulate interest over time.
A traditional blockchain works on a Proof of Work (PoW) mechanism, which consumes an obnoxious amount of electricity and capital.
A Proof of Stake (PoS) blockchain, however, allows the user to stake their blockchain tokes to get the right to validate transactions and create new blocks.
Bitcoin Wallets – A Genius DeFi Business Idea?
The several types of Bitcoin wallets are as follows:
- Web wallets
- Mobile wallets
- Desktop wallets
- Hardware wallets
- Paper wallets
- Multisig wallets
- Hierarchical Deterministic (HD) wallets
But what exactly is a Bitcoin wallet, and how is Bitcoin wallet development a viable business idea?
Just like you need a bank account to manage your digital finances and an email program to take care of your emails, you need a Bitcoin wallet to manage all activities related to your Bitcoins.
As you might already know, Bitcoin relies on complex cryptography for all activities related to its transaction. It is impractical for humans to do this by themselves. A Bitcoin wallet automates the convoluted cryptography for the user.
Creating your own Bitcoin wallet app can be an excellent idea, especially in 2021. Several companies like Tesla and PayPal have started to embrace cryptocurrencies.
Thus, giving more incentive to smaller companies, freelancers, and regular consumers to transact in the DeFi system. Companies and consumers can use your Bitcoin wallet app to send and receive payments over the blockchain.
Several free resources available on the internet allow the average joe to develop a fully functional Bitcoin wallet from scratch, which can be integrated on a business website or an eCommerce store site.
These ready-made crypto payment services are going to be the next big thing for DeFi.Several companies like BitPay and Coinbase have already jumped in on the opportunity. But it is not too late for you yet!
The cryptocurrency and decentralized finance market is still in its infancy and very lucrative. It will not be too long before DeFi becomes a part of our everyday lives. That is when the business competition in the DeFi space will become cut-throat!
Hence, this is the ideal time to dive into the DeFi world with a Bitcoin wallet and payment services.