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Decentralized finance (DeFi) is an emerging industry that promises to revolutionize the traditional finance sector. This industry has the potential to disrupt traditional finance because of its ability to be a financial tool that is outside of government and regulatory control. DeFi is open source, meaning that protocols and apps are theoretically open for users to inspect and to innovate upon. As a result, users can mix and match protocols to unlock unique combinations of opportunities by developing their own dApps.
What you can do with DeFi
With DeFi, you can do most of the things that banks support — save, earn interest, borrow, lend, buy insurance, trade derivatives, trade assets, and more.
Why you want to use DeFi
it’s faster and doesn’t require paperwork or a third party. As with crypto generally, DeFi is global, peer-to-peer (meaning directly between two people, not routed through a centralized system).
Transparent: Everyone involved can see the full set of transactions (Traditional banks don't grant that kind of transparency).
Flexible: You can move your assets anywhere at any time, without asking for permission or waiting for anyone's approval, waiting for long transfers to finish, and paying expensive fees.
Open: It is open to everyone as you don’t need to apply for anything or “open” an account. You just get access by creating a wallet.
please note
DeFi is not Bitcoin and Bitcoin is not DeFi
BITCOIN AND DeFi
Bitcoin is a digital currency that operates on its own blockchain, while DeFi is a concept that describes financial services built on public blockchain like Ethereum, Bitcoin, etc. DeFi is comprised of a variety of applications around financial services such as trading, borrowing, lending and derivatives.
WHAT CAN YOU DO WITH DEFI?
DeFi uses cryptocurrencies and smart contracts to provide financial services without the involvement of banks. With the addition of more dApps, the possibilities of what you can do with DeFi continue to grow.
The most popular uses of DeFi include;
- Sending money anywhere in the world (in little time and affordably)
- Storing money using crypto wallets (and earning higher yields than at a traditional bank)
- Borrowing and lending on a peer-to-peer level;
- Trading cryptocurrencies anonymously and at any time 24/7
- Trade tokenized versions of investments such as stocks, funds, other financial assets and non-fungible tokens (NFTs)
- Crowdfunding and buying insurance with the help of companies such as Etherisc.
DeFi the future?
The goal of DeFi is to get rid of the third parties that are involved in all financial transactions. Decentralized finance is still in the beginning stages of its evolution. For starters, it is unregulated, which means the ecosystem is still riddled with infrastructural mishaps, hacks, and scams. but we will be hoping to see more improvements on the structure and every other entity.