What is DeFi
The term “DeFi” stands for decentralized finance, which refers to a range of applications built on top of blockchain and crypto. These applications aim to eliminate the need for centralized intermediaries like banks, thereby democratizing access to financial services.
This is a big deal because it means that many of the world’s unbanked people can now use these services, which could make a huge difference to their lives. In fact, the World Bank estimated that 1.7 billion adults were unbanked in 2017 alone.
Unlike traditional finance, DeFi services are accessible to all – no identity checks required. This makes them ideal for those in developing countries and for those in poor countries who have no way to access bank accounts or have limited funds.
What is DeFi in Simple Terms?
These protocols are built on public distributed networks using self-executing agreements written into lines of code called smart contracts. These protocols run on a variety of different blockchains and offer a wide range of services.
They are a great option for investors who want to hedge their investments or diversify their portfolios, as they allow them to trade across multiple crypto tokens without losing all of their funds. They also have the added benefit of being incredibly secure.
Another advantage is that they are more resistant to fraud and hacks than centralized exchanges, as they are not controlled by one person or company. Moreover, they are more open to the general public because the transactions happen in real time, which is a big draw for crypto enthusiasts.
A third major advantage is that these applications are very easy to use. Users just need to create a wallet and link it with their crypto wallet, and they can begin trading and transferring funds almost immediately – no waiting for bank transfers to clear!
Some of these DeFi applications are free to use, while others require payment for services. This is a great benefit for those who don’t have access to a bank account, and it helps to level the playing field when it comes to investing in crypto.
The downside is that some of these platforms are prone to issues such as price slippage and front running. This is due to coding errors and bugs that have become more prevalent in the last few years. These bugs have led to a lot of volatility in the market.
There have also been some headlines in the press claiming that some DeFi projects may fall foul of securities laws and need to be regulated. This has drawn the attention of regulators and risk management firms.
Stablecoins are a key component of the DeFi ecosystem, offering programmability and security without the downsides of volatility. They can be used for transactions such as mortgages, insurance and payments.
This type of crypto is secured by a blockchain and uses cryptography to secure the coins. Its volatility is much lower than other types of crypto, so it’s an ideal choice for traders who are looking to avoid a big loss in the short run.