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abigail

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At this point, you might be wondering how and where people are using DeFi. Well, we have got you covered. Let’s check out some of the prominent use cases of decentralized finance.

Metaverse
To become a reality, the Metaverse requires various components such as NFTs(that serve as identities), on-chain credit scoring, and DeFi. These components come together to generate a virtual environment in which you can reside digitally. For the Metaverse to work effectively, a trustless financial system is required. This is where DeFi enters the picture. Decentralized finance offers the crypto-decentralized framework required by the Metaverse to house its currencies and economy, allowing users to earn, spend, borrow, lend, or invest without the need for a central authority.

DEX
DEXs, or decentralized exchanges, are decentralized counterparts of centralized exchanges (CEXs). Dex’s applications range from asset trading to derivatives trading and are not confined just to cryptocurrency trading. The danger of hacking is negligible since the assets are not held or managed by the decentralized exchange.

Stablecoins
Stablecoins are backed by valuables such as gold, fiat currency, or many other cryptocurrencies, and they assist in reducing volatility in the cryptocurrency market. Stablecoins are used in the DeFi ecosystem for lending, borrowing, payment transfers, and other purposes.

Prediction markets
Users trade value on prediction-based platforms by forecasting the result of future events. Such transactions are automated using DeFi platforms. These projects are decentralized and peer-to-peer, yet they also allow worldwide access. DeFi projects allow users to wager on events such as gaming and sports.

Asset Management
The most advantageous effect of DeFi is total control and ownership of one's assets. Several DeFi initiatives enable users to manage their assets, such as purchasing, selling, lending, and even earning income. On the DeFi platform, there is no need to share any personal data or sensitive information, like one would with their bank or credit card company. Users can keep such private and sensitive data and information on their personal devices using DeFi initiatives such as D-Wallet.

Insurance
Insurance is one of the largest financial industries that has already proven to be a key DeFi use case. The present insurance system is clogged by mountains of paperwork, outdated audit systems, and archaic insurance claim procedures. All of the present system's shortcomings can be resolved with the effective adoption of smart contracts.

Lending & Borrowing
Borrowing and lending protocol is an important DeFi use case. The DeFi ecosystem is better suited for peer-to-peer (P2P) borrowing and lending initiatives. Several DeFi projects concentrating on this specific use case have already hit the market. These initiatives have their own interest-based borrowing and lending mechanisms.

DAOs

DAOs (Decentralized Autonomous Organizations) are the DeFi equivalent of centralized financial institutions, making them one of the cornerstones of decentralized finance use cases. Centralized financial entities play a significant role in the conventional system. These companies function as administrative entities that conduct key financial operations such as fundraising, asset management, governance implementation, and so on.
 

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