What is DeFi?
As more and more people enter cryptocurrencies and adopt decentralized financial systems, the term DeFi continues to be spread. So, what is DeFi? What are its advantages? How does it work? What are some examples of DeFi?
In this article, we will discuss DeFi in detail and answer many questions about distributed finance so that you can understand all the requirements before entering cryptocurrency distributed finance.
What is DeFi?
DeFi is a broad title that covers all the services and technologies provided in the field of distributed finance. These services can include DEX (decentralized exchange), decentralized insurance organization, encrypted wallet, stable currency, etc.
The reason for the decentralization of DeFi is the basis for its realization of the blockchain architecture. This means that thousands of nodes around the world maintain a shared ledger of all transactions. In this way, the ledger will not be stored in a “centralized” manner like financial organizations such as Visa.
Usually, the technology produced by Ethereum identifies itself as DeFi, although by definition, any financial service or technology that implements a distributed architecture can be called DeFi.
What are the advantages of DeFi?
Since its development, the financial system has functioned entirely through intermediaries. If you want to transfer funds from your account to another account, please use a payment system such as MasterCard.
These parties have complete control over the transaction. They can choose to stop or keep your transaction, and they can even choose to list the transaction in a private entry. They also charge transaction fees, and traders must comply with terms and conditions.
This creates a system in which the payer and the payee need to trust the middleman and hope that everything is gone.
However, due to the use of decentralized finance, intermediaries were abolished. Power is in the hands of traders. This is achieved through blockchain architecture and infrastructure such as Ethereum, in which Ethereum nodes around the world maintain a shared ledger, which means that no party can tamper with, stop or suspend transactions.
DeFi makes financing more transparent, reliable, and interoperable, thereby liberating the financial system of intermediaries and their payment terms.
What are the advantages of DeFi?
Since its development, the financial system has functioned entirely through intermediaries. If you want to transfer funds from your account to another account, please use a payment system such as MasterCard.
These parties have complete control over the transaction. They can choose to stop or keep your transaction, and they can even choose to list the transaction in a private entry. They also charge transaction fees, and traders must comply with terms and conditions.
This creates a system in which the payer and the payee need to rely on an intermediary.
However, due to the adoption of distributed finance, intermediaries were abolished. Power is in the hands of traders. This is achieved through blockchain architectures and infrastructures such as Ethereum, in which Ethereum nodes around the world maintain a shared ledger, which means that no party can tamper with, stop or suspend transactions.
DeFi makes financing more transparent, reliable, and interoperable, thereby liberating the financial system of intermediaries and their payment terms.
Some examples of
DeFi There are many examples and use cases for DeFi. However, some of the most outstanding and effective DeFi services include NFT exchange, cryptocurrency trading, digital exchanges, digital wallets, cryptocurrency to legal currency conversion, distributed finance, etc.
A good example of the DeFi project is KingSwap, which is an automatic liquidity mining pool on Ethereum. It allows users to exchange NFTs, perform unfinished legal currency conversions, and trade cryptocurrencies. KingSwap's encrypted token is called $KING, backed by the Ethereum infrastructure. This is an outstanding display of DeFi technology.
Conclusion
Learn more about what DeFi is, its advantages are clear at a glance how DeFi works, and some excellent examples of DeFi services and technologies.
Hope you find this article rich and interesting. Please let us know your thoughts in the comments!