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

DeFi is a fairly new term that is often used when discussing cryptocurrencies and blockchains. It will be recalled that cryptocurrency is a digital currency that does not exist physically, but is purely virtual – decentralized.e does not depend on the financial institution in particular, the Central Bank. As for the blockchain, it is a technology that allows you to store and transmit data simultaneously, securely, transparently and without the intervention of the central supervisory authority.

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

Definition of DeFi Crypto

DeFi is short for “Decentralized Finance”, which literally means “decentralized finance”. In other words, DeFi combines financial services that operate decentrally, ie on the basis of public blockchains. Note that the most commonly used blockchain is now called Ethereum.

DeFi offers classic banking services such as opportunity take loansof take out insurance Where save and perceive interests. What distinguishes this system from traditional banking services at the level of steps:

  • Much more quicklyeven instantaneous;
  • Simplified without the need to draw up any documents;
  • Without an intermediary for example, a bank adviser;
  • Cheaper with commissions 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 what cryptocurrencies are the main currency of the transaction 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 programs to coordinate the system. One of the most commonly used DApps is digital wallet in which cryptocurrencies are stored after the auction.

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Why do you need DeFi cryptocurrency?

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

  • Getting a loan : if you need financial resources, DeFi allows you to get them easily and quickly without resorting to traditional banking services;
  • Realization of savings : thanks to DeFi you can save your cryptocurrencies to earn regular interest and increase your investment;
  • Cryptocurrency trading : You can also buy, sell and exchange your peer cryptocurrencies without intermediaries.

Who uses decentralized finance and why?

As you can see, DeFi is designed for both individuals and enterprises. This is useful for those who plan to use financial services decentrally and do not discriminate between users. In addition, the purpose of this technology is gradually replacing the current financial system which can be complex, slow and overly restrictive.

Conclusion: let’s summarize DeFi!

In summary, DeFi is a version upgraded banking and financial system as we know it today. This ecosystem is still young and he will be brought evolve improve over time. Decentralized finance is likely to operate with fiat currency for several years outdated.

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