What is a Decentralized Money Market and Why is it Beneficial?

A typical traditional money market is completely different from a blockchain powered decentralized money market. In a typical money market, there are brokers and intermediaries manipulating the market. On the contrary,?a decentralized money market is managed by a huge community that could be composed of all the participants of the decentralized space.?

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Why Decentralized Money Markets are beneficial?

?Permission less

A typical money market is managed by a centralized authority. As a result, users need to seek permission from such managing authorities. But a decentralized money market is permission less which means anyone can stake whatever they have and earn interest from their capitals. Hence, it makes entry to the market fairly simple and gratifying to its users.?

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Non Custodial?

Modern day archaic money markers have centralized authorities controlling the funds. But decentralized money markets are governed by smart contracts with a predefined logic which makes operations simplified and battle tested for challenges.?

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Over collateralized?

When you look at the traditional money market, they are always under collateralized. But a decentralized money market follows an over collateralization process. Hence they bring a higher degree of stability to the market and allow for greater participation.?

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Composability?

Composability is an essential element of the decentralized money market where they can interoperate with other markets creating endless possibilities for the users.?

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How a?Decentralized?Money Market Works?

A traditional money market works on an intermediary concept where the borrowers will seek for the loans after putting up with some collaterals. Once they have paid off the loan, they can take the collateral back. However, if they fail to pay off the loans, the collateral will be sold. However, much of the loans in a traditional money market are under collateralized.?

When juxtaposing the same with a decentralized money market, it is governed by the smart contracts where they have specific codes embedded in the system. If the borrower fails to pay off the loans, their collateral will be liquidated. Since it is a completely decentralized money market, there’s no false data shown and the ecosystem can easily sustain itself during tough times.?

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What is New Happening in a Decentralized Money Market?

Fringe Finance has envisaged new use-cases where they have stressed more on the cryptocurrencies with lowest market cap. In this way, the decentralized money market has opened up to even low cap cryptos. Through this approach, even low cap alt coins with better use-cases will be getting the much needed attention and they can grow in the?crypto ecosystem!