DEFI

Decentralized Finance, abbreviated as “DeFi,” is a revolutionary financial system that functions independently of centralized financial intermediaries such as banks, credit unions, or insurance funds. DeFi is an acronym for “decentralized finance,” an umbrella word for several financial applications built on top of blockchain technology with the goal of disintermediating financial intermediaries.

DeFi is based on sophisticated distributed ledger technology (DLT) – or blockchain – to disrupt the present financial order and enable a more transparent and fair financial system. DeFi’s further distinguishing characteristic extends the blockchain beyond basic data or value transfers to more complicated financial use cases like trading, lending, yield farming, flash loans, and derivatives.

Benefits of DeFi

  • It removes the fees charged by banks and other financial institutions for their services.
  • Instead of depositing your money in a bank, you store it in a secure digital wallet.
  • It is accessible to all individuals with an internet connection without prior clearance.
  • You may send and receive cash in a matter of seconds or minutes.
  • By enabling individuals, merchants, and corporations to perform financial transactions using new technology, decentralized finance removes middlemen. This is performed through peer-to-peer financial networks that include advanced security protocols, connection, software, and hardware. Rather than that, users may transfer, trade, invest, and transact peer to peer utilizing cryptocurrencies and digital assets through automated smart contracts, obviating the need for these inefficient and expensive middlemen.

 

In 2021, DeFi saw explosive growth, with the total value of cryptocurrencies locked in DeFi protocols increasing roughly 800% year over year. Nonetheless, DeFi is still in its incipient stages as a technology in 2022.

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