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DeFi (Decentralized Finance)​

Decentralized finance, or DeFi, uses emerging technology to remove third parties in financial transactions. The components of DeFi are stablecoins, software, and hardware that enables the development of applications.

Decentralized finance eliminates intermediaries by allowing people, merchants, and businesses to conduct financial transactions through emerging technology. This is accomplished through peer-to-peer financial networks that use security protocols, connectivity, software, and hardware advancements

How DeFi works

DeFi protocols uses code called smart contracts that run on a blockchain network. The source code of most DeFi projects is available for review and audit by anyone in the world. Users of different DeFi protocols can communicate with these smart contracts via wallets to send, borrow, lend, or use services provided by DeFi. The

  • DeFi project on a blockchain network provides easy and cheap access to capital, efficient lending and borrowing, and a decentralized cryptocurrency and synthetic exchange.
  • Due to its decentralized nature, some of his DeFi projects like Uniswap have become highly efficient global financial marketplaces serving both individuals and institutions.
  • Additionally, DeFi eliminates middlemen, enabling lower cost and more efficient financial services.
  • DeFi is on a blockchain network and is generally open source, so anyone with an internet connection can view the source code and audit and view all transactions.
  • Blockchain data is inherently immutable. In other words, once information is on the blockchain network, it cannot be changed. This creates a code-dependent and trusted financial system. One example is the decentralized exchange (DEX).

DeFi Protocols

Protocols can be viewed as rules or standards written to govern a particular task or activity.

  • A DeFi protocol can include a set of rules and principles that follow a real-world regime for participants in a particular industry.
  • DeFi protocols ensure interoperability while providing liquidity to the DeFi ecosystem. As a result, multiple companies have been able to build apps and services using the most popular DeFi protocols.