what is DeFi

Decentralized finance (DeFi) is a catch-all term for a slew of public blockchain apps and projects aiming at upending the current financial system. DeFi is a term that refers to financial apps that are built on blockchain technologies and use smart contracts. It is inspired by blockchain technology. Smart contracts are legally binding, automated agreements that can be accessed by anybody with an internet connection. They can be accessed by anybody with an internet connection and do not require the employment of middlemen.

Centralized finance has its own set of problems.
Financial markets have the ability to enable innovative ideas and create societal prosperity. Even still, these markets have a concentrated power structure. People who invest in the existing financial system hand up their assets to intermediaries like banks and financial institutions, which keeps risk and control at the forefront of these systems.

Bankers and institutions have a history of failing to see market risks, as evidenced by the 2008 financial crisis. Without a doubt, when central authorities control money, risk builds up in the center, endangering the entire system.

Bitcoin and other early cryptocurrencies were only decentralized in terms of issuance and storage, despite the fact that they were designed to allow individuals complete control over their assets. Until the advent of smart contracts, which enabled DeFi, providing access to a broader set of financial instruments remained a challenge.

Decentralized exchanges
Decentralized Exchanges (DEx) are one of DeFi’s most important features, as they lock the most capital compared to other DeFi protocols. DExs enables users to trade tokens for other assets without the need for a centralized middleman or custodian. Traditional exchanges (centralized exchanges) provide similar services, but the investments available are subject to the will and costs of the exchange. Another disadvantage of CExs is the additional cost of each transaction, which is addressed with DExs.

Advantages

DeFi has a number of significant advantages, including cost, speed, and security. Blockchains and cryptocurrencies are accessible to everyone with an internet connection. Users can trade and move their assets at any time, without having to wait for bank transfers or pay bank fees. DeFi is lightning fast. Interest rates are updated numerous times each minute, and the blockchain is updated as soon as a transaction is completed. Due to the open nature of DeFi, every single transaction is visible to the general public.

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