Think of the current financial systems, porting them over with blockchain technology and removing middleman in transactions by replacing them with smart contracts. (Ethereum is currently the largest platform)
Smart contracts?
A middleman is usually needed in transactions to reduce counterparty risk, that is the risk that either one of the party do not fulfill the contract by failing to provide the money or the product. A smart contract can be programmed to automatically transfer owenership of a good when certain criterias are met, such as one party transferring a sum of money over. Transactions made are recorded on a public blockchain and ownership of an asset cannot be disputed.
What are people doing with it?
The common uses are borrowing money and earning interest. You can have lending services which do not require a centralised bank. At the current stage, the collateral required is more than what you can lend so it's not a viable replacement yet (over-collatorized loan). It is more like a pawn shop to some extent. You can look at Compound if you are interested. Some may convert fiat currency (e.g. USD) to a crytocurrency pegged to a real-world currency (stablecoin) and earn interest through the platform (ranges from 0.05%-10%).
Why is it good?
It allows people who previously unable to access financial serivces (worldwide more than 1bil) to be able do so and does not discrimate them from credit reports, location of where they stay, etc.
Why bad?
Think of the current financial systems, porting them over with blockchain technology and removing middleman in transactions by replacing them with smart contracts. (Ethereum is currently the largest platform)
Smart contracts?
A middleman is usually needed in transactions to reduce counterparty risk, that is the risk that either one of the party do not fulfill the contract by failing to provide the money or the product. A smart contract can be programmed to automatically transfer owenership of a good when certain criterias are met, such as one party transferring a sum of money over. Transactions made are recorded on a public blockchain and ownership of an asset cannot be disputed.
What are people doing with it?
The common uses are borrowing money and earning interest. You can have lending services which do not require a centralised bank. At the current stage, the collateral required is more than what you can lend so it's not a viable replacement yet (over-collatorized loan). It is more like a pawn shop to some extent. You can look at Compound if you are interested. Some may convert fiat currency (e.g. USD) to a crytocurrency pegged to a real-world currency (stablecoin) and earn interest through the platform (ranges from 0.05%-10%).
Why is it good?
It allows people who previously unable to access financial serivces (worldwide more than 1bil) to be able do so and does not discrimate them from credit reports, location of where they stay, etc.
Why bad?
Not simple to understand for average person (e.g. Metamask)
May have bugs in smart contracts which results in losses in money