3 minutes to (finally!) Understand DeFi, decentralized finance!

DeFi is a fairly new term that is often encountered when talking about cryptocurrencies and blockchains. Recall that cryptocurrency is a digital currency – having no physical existence, but being purely virtual – decentralized nand not dependent on a financial organization specific as the Central Bank. As for the blockchain, it is a technology that allows the storage and transmission of data in a simultaneous, secure, transparent and without the intervention of a central control body.

So what is DeFi in all of this? How it works and what is yours utility ?

Definition of DeFi Crypto

DeFi is short for “decentralized finance” which literally means “decentralized finance”. In other words, DeFi brings together financial services that operate in a decentralized way, i.e. relying on public blockchains. Note that the most commonly used blockchain currently is called Ethereum.

DeFi offers classic banking services, such as the ability to take loansfrom take out insurance Where is it to save And feel interests. What differentiates this system from traditional banking services is at the level of phases which are:

  • Much more rapideven instantaneous;
  • Simplified without the need for bureaucratic practices of any kind;
  • Without intermediaries as a banking consultant;
  • Cheaper with taxes minor.

How does DeFi Crypto work?

The working principle of the Defi is quite simple and complex at the same time. The system uses cryptocurrencies, smart contracts and DApps. Knowing that cryptocurrencies are the main transaction currency in DeFi.

Smart contracts are actions that are performed automatically when certain conditions are met. This technology it eliminates intermediaries in transactions. To coordinate the operation of the system, DeFi also uses DApps or decentralized applications based on the blockchain. One of the most used DApps is the digital wallet in which cryptocurrencies are archived after exchanges.

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What is DeFi cryptocurrency for?

DeFi has a multitude of possible uses. Here are some uses that are limited to the financial services field:

  • Get a loan : if you need financial resources, DeFi allows you to obtain them quickly and easily without going through traditional banking;
  • Realization of savings : thanks to DeFi you can save your cryptocurrencies to get regular interest and grow your investment;
  • Cryptocurrency trading : it is also possible to buy, sell and exchange your cryptocurrencies peer to peer without going through intermediaries.

Who uses decentralized finance and why?

As you can see, DeFi is for both individuals and businesses. It is useful for anyone who intends to use financial services in a decentralized way and does not discriminate between users. Furthermore, the goal of this technology is to gradually replace the current financial system which can be complex, slow and overly restrictive.

Conclusion: let’s recap the DeFi!

To recap, DeFi is a version modernized of the banking and financial system as we know it today. This ecosystem is still young and will be brought to to evolve to improve over time. Within a few years, decentralized finance is likely to carry out fiat currency transactions obsolete.

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