A Guide to Understanding DeFi

The evolution of Bitcoin back in 2009 amassed various blockchain industries. Different blockchains and cryptocurrencies have proven to solve an identical problem, hence evolving the DeFi (decentralized finance) aspect. DeFi as an aspect makes a replacement for traditional financial services. Furthermore, it has a diversity of smart contracts that facilitates DApps ( decentralized applications), with most DeFi applications built on Ethereum.

A Guide to Understanding DeFi
A Guide to Understanding DeFi

The creation of Bitcoin is for a decentralized world, DeFi has promoted decentralization going further by adding extraordinary functions.

DeFi further advances the blockchain and crypto by assigning complete control to the mass instead of being controlled by the centralized sector.

With each blockchain and coin/token able to solve a problem, DeFi can through DeFi applications procure solutions for users by allowing lending, investing, trading, saving, market-making, and more.

Decentralized finance sets a goal to challenge and as well if able to replace the use of traditional financial services providers. Anyone can build on the pre-existing application on DeFi due to its open-source code.

Decentralization allows its users to have total control of their assets, antagonizing banks, and financial institutions that possess control over your funds and assets. DeFi does not stop at only giving power to its users but also extricates risk.

What is Centralized Finance (CeFi)?

These are traditional private sectors like banks that keep individual’s money, and documents, lend loans and provide security for your data. There are so many transactions done by the traditional finance sector which, however, slows the process of transactions. Even have to stick to the highlighted working hours of the private sector.

CEFI control the data that you entrust to them. But to open an account with the bank, documents, and details that can be used for identification must have been submitted.

On the contrary, DeFi offers all the services provided by CeFi which can be used by anybody who uses an Internet connection, DeFi is independent of banks or any third party. The awesome part of the decentralized world is that transactions are carried out every second without delay. And your crypto or data is accessible at any time, DeFi provides more security to your data, and goes long way to solve the problems of CeFi.

Decentralized finance (DeFi) ensures that data or assets are handled by various smart protocols. DeFi allows users to lend and borrow digital assets. You can send cryptocurrency to another smart contract which is your collateral (like traditional banking which you need intermediaries) to have a different asset as an exchange. However, that collateral would be locked up till you pay back the loan.

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