Hi hivers, If you are looking for Information regarding Lending models in banks and Defi protocols, then you have landed on the right place. This is the kind of comparison we will do in this post. Banks are very famous when it comes to Lending. Banks provide Better services for the people so that they can deposit money in the bank and banks earn money from that deposited money by giving that money as a loan to the loan seekers. For the people who want loans, they have to verify their income, and they should have put credit score. Then the bank decides whether that person will qualify or not. So here you can see that the bank is a middleman. The process of applying loan is slow because there is paperwork needed, and if you have even small issues regarding your credit history or income, then you can be rejected. So this is the policy of the traditional Bank.
Now here, defi flips the Whole model. There is a platform whose name is Ave that depends on the smart contracts, and what is the Process? So the process is just simple, you just need to supply your crypto in the liquidity, and you don't need to prove your income or any credit history or anything. And there is no paperwork and no KYC. By just supplying your crypto there and yoU become a Lender. One of the most important things is the transparency that you can see here. And one more important thing that's there is no branch manager, no middleman, and no collection department. Because everything works based on smart contracts.
Decentralised finance relies on blockchain security, and Blockchain is very secure. Also, there is a core system that works behind it. On the other side traditional banking system relies on the Legal system. Also, in Defi, that is an international access, so that is a big difference between the banks and Defi. Banks only provide service in your area, which is all about your country. And it is just limited Also you will not know where they invest your money by using your money.
So now let's talk about the risk. There is a risk of smart contract bugs. And yes, there is a volatility that I always talk about in every post, that volatility is an issue and that is risk, not an issue but risk. That is always with the Crypto, so you have to understand it. Also, there is no regulation because crypto is difficult to regulate. One more reason is that crypto is global. That is why it is there are a lot of problems in regulation. The bank has some extra government benefits; however, this changes country by country and also bank by bank. One more thing is it is not guaranteed.
So traditional banks has a centralised control and it Is required And there is slow work and process on the other side, Defi providing loan Without even single document so that is the big difference what is your opinion regarding this information I would like to know about that and I appreciate every comment So make sure you have commented Now I'm signing off.
