3 minutes to (finally!) understand DeFi, decentralized finance!

DeFi is a fairly new term that comes up frequently when discussing cryptocurrencies and blockchains. We remind you that a cryptocurrency is a digital currency that does not have a physical existence, but is purely virtual – decentralized.e does not depend on the financial institution particular central bank. As for the blockchain, it is a technology that allows you to store and transfer data simultaneously, securely, transparently and without the intervention of a central authority.

So what is DeFi in all of this? How it works and what it is utility ?

DeFi Cryptocurrency Definition

DeFi is short for Decentralized Finance, which literally means Decentralized Finance. In other words, DeFi brings together financial services that operate in a decentralized manner, i.e. based on public blockchains. Please note that the most commonly used blockchain currently is called Ethereum.

DeFi offers classic banking services such as the ability to take loansfrom take out insurance Where save as well as understand interests. The difference between this system and traditional banking services is as follows:

  • A lot more fasteven instant;
  • simplified without the need to complete any documents;
  • Without intermediaries for example, a banking consultant;
  • Cheaper with commission less.

How Does DeFi Crypto Work?

The principle of operation of Defi is quite simple and complex at the same time. The system uses cryptocurrencies, smart contracts and DApps. Knowing that cryptocurrencies the main transaction currency in DeFi.

Smart contracts are actions that are performed automatically when certain conditions are met. This technology excludes intermediaries in transactions. DeFi also uses DApps or blockchain-based decentralized applications to coordinate the operation of the system. One of the most used DApps is digital wallet wherein cryptocurrencies are stored after bidding.

Read also DApps: Understanding Decentralized Applications in 3 Minutes!

What is DeFi cryptocurrency for?

DeFi has many possible uses. Here are some uses that are limited to the financial services industry:

  • Getting a loan : if you need financial resources, DeFi makes it easy and quick to get them, bypassing traditional banking;
  • Realization of savings : thanks to DeFi, you can save your cryptocurrencies in order to receive regular interest and increase your investments;
  • Crypto asset trading : you can also buy, sell and exchange your cryptocurrencies in a peer-to-peer network, bypassing intermediaries.

Who Uses Decentralized Finance and Why?

As you can see, DeFi is for both individuals and businesses. This is useful for anyone who plans to use financial services in a decentralized manner and does not differentiate between users. In addition, the purpose of this technology is gradually replacing the existing financial system which can be complex, slow, and overly restrictive.

Conclusion: Let’s sum up DeFi!

Recall that DeFi is a version modernized banking and financial system as we know it today. This ecosystem while still young and they will bring him evolve to improve over time. In a few years, decentralized finance is likely to transact with fiat currency. outdated.

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