A lot is going on in the decentralised finance (DeFi) world in Thailand, we’ve got it covered in this article. Before talking in detail about Thailand, let’s explain what DeFi is.
Looking for a role in DeFi in Thailand? A company hunting for the best candidates? Contact RECRUITdee today.
What is DeFi (Decentralised Finance)?
DeFi (or Decentralised Finance) is a new way of executing financial transactions through DApps. DApps are built on blockchain networks with the most common one being Ethereum. With DeFi, there are no financial intermediaries like mainstream transactions, so the transactions don’t use exchanges, brokerages, or banks.
Like banks, though, people can borrow or lend money. They can even earn interest like you would in a savings account. With DeFi, instead of making a transaction through a securities exchange or a cryptocurrency exchange, participants make their transactions directly through open-source smart contract programs that are created and maintained by a developer community.
New Trends in DeFi 2022
Given that DeFi is still relatively new, new trends are emerging all the time. Decentralised Finance provides many services. As well as being a trading platform for cryptocurrency, it is also used for things like insurance, loans, and other financial services on the blockchain platform. With these services now being offered, they will probably trigger new trends that will have an impact on the finance industry. Examples of new trends that DeFi has brought about include decentralised lending, Stablecoin, and DeFi insurance.
Decentralised Lending
Crypto lending is a financial product that has been emerging from the Decentralised Finance platforms. People who hold cryptocurrency can lend it on a decentralised lending platform. This means they can earn a passive income as interest paid by the borrower. Decentralised lending is attractive to lenders because they can earn interest at a low-risk thanks to the collateralised method of borrowing which means that lenders are repaid even in situations when a borrower doesn’t repay a loan.
DeFi Insurance
DeFi insurance protects cover investors and cryptocurrency assets from any associated risks. What’s more, investors’ DeFi deposits are protected against the volatility of cryptocurrency and are safeguarded against theft from cryptocurrency wallets as well as exchange platform hacks.
Stablecoin Popularity
Stablecoin is a type of cryptocurrency whose market value is pegged to an external reference like the US Dollar. Unlike cryptocurrencies like Bitcoin, which are highly volatile, Stablecoins are more suitable for everyday use because. Because of this, investors and traders are constantly looking out for stablecoins that hedge risk and store value.
What are the benefits of DeFi?
A Healthier Financial System
One of the most talked about benefits of DeFi is the element of decentralisation. The Covid-19 pandemic showed just how much traditional, centralised systems are vulnerable because they’re based on individuals having direct contact. Conversely, DeFi doesn’t rely on such a high amount of direct contact, which means cryptocurrency companies and prices have seen huge successes.
Fewer Errors
Often, when a financial crisis occurs, it is a result of an intermediary or central bank mismanaging a situation. With DeFi, there are smart contracts that run seamlessly with no room for human error.
Seamless Transactions
Traditionally making transactions involves queuing to be seen in person and filling in endless paperwork. With DeFi, operations are seamless and can be done anytime, anyplace as long as there is an internet connection.
What are the downsides of DeFi?
Over-collateralisation
Though decentralised lending is attractive as a service, it can be a victim of over-collateralisation. This is when a borrower’s assets have a value that is much higher than the amount loaned. This part of the DeFi protocol is essential, though, because it helps to remove problems like credit ratings.
Issues of dependency
Decentralised Finance is an open-source platform that interacts with lots of decentralised applications and smart contracts on the blockchain to develop services from ones that exist already. This means that if the hosting project is on an unstable blockchain, the project will also be unstable.
Administrator Keys and the associated security risks
With DeFi protocol, administrator keys are available to suspend or renew contracts. These administrator keys are somewhat of a double-edged sword: they can be a security measure but can also be a threat if they are given to someone with malicious intent.
Low Interoperability
There are lots of different blockchains like Binance Smart Chain, Ethereum, and Bitcoin. Each blockchain is its system and they don’t interact with each other. With this low level of interoperability, there isn’t much scope for flexible transactions with a unified platform in the future.
Decentralised Finance in Thailand
There are more than 3.6 million people in Thailand that own cryptocurrency. This accounts for 5.2% of Thais. The country ranked 2nd globally for the number of crypto owners. What’s more, in 2020, Thailand’s biggest crypto exchange saw a growth of 600%, which is huge. As a result, there’s a chance that Thailand could become a global crypto hub.
Thailand was also one of the first Southeast Asian countries to enact legislations around cryptocurrencies. The first decrees were set in 2018. Notably, the country established an Initial Coin Offering Portal (ICO Portal) under the Securities and Exchange Commission’s regulations. The ICO Portal provides a system that facilitates how newly-issued tokens are offered.
Because of Thailand’s keen advancement of DeFi, there is expected to be a significant uptake in Decentralised Financed as the new and innovative services attract more and more people. This could be for payments, lending, transfers, and asset delivery.
What this might mean is that there will be less of a demand for the services of commercial banks. If this occurs, it will impact the financial investment world.
Final thoughts
There has been a huge rise in cryptocurrency in Thailand and decentralised finance has grown in its popularity too. Over the last year or two, Thailand has ranked second in the world for internet searches of “decentralised finance.” What’s more, even Thailand’s centralized banks have embraced decentralised finance with SCB announcing their 50 million dollar investment fund. What the future holds, only time will tell!
Looking for a role in DeFi in Thailand? A company hunting for the best candidates? Contact RECRUITdee today.
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