DeFi
What Is Decentralized Finance?
Decentralized finance, or 'DeFi,' is a fast-rising digital financial infrastructure designed to eliminate the need for a central bank or government agency to monitor financial transactions. DeFi is inter-connected with blockchain - the decentralized, immutable, public ledger on which Bitcoin is based - enabling all computers (or nodes) on a network to keep a copy of the history of all financial transactions.
DeFi uses cryptocurrencies and smart contracts to provide financial services to eliminate the need for intermediaries such as guarantors. Such services include lending (where users can lend out their cryptocurrency and earn interest in minutes rather than once a month), receiving a loan instantly, making peer-to-peer trades without a broker, saving cryptocurrency and gaining a better interest rate than from a bank, and buying derivatives such as stock options and futures contracts, and even directly donating a portion of revenue directly to their favorite organizations and receiving a tax break for doing so.
Unlike traditional banks, DeFi removes all the layers of intermediaries and middlemen that would normally be involved through the use of smart contracts. This also removes all the high costs associated with this legacy system - and these benefits are transferred to the end-user. We are directly able to reap the rewards that the previous creators of wealth used to keep hidden from us.
DeFi may still be young and further growth will be needed for its massive adoption. It's already beginning to rebuild and replicate the entire world’s financial system using decentralized applications that fit together like little blocks of Legos. Each piece is quite specific to an overall plan and we are trying to fit in where we can. There are many benefits of DeFi for users that traditional banks are either going to have to adapt, adopt, or be left behind.
All this rising discontent with banks, coupled with all of the new information and growing products from the crypto space, are providing people with a reason to flee to an alternative. With DeFI, they no longer have to participate in a system that doesn't work for them.
Last modified 1yr ago