What is DeFi?
DeFi, short for decentralized finance, refers to financial services built on blockchain networks without traditional intermediaries.
These services may include:
- lending
- borrowing
- trading
- asset management
🤔 Why DeFi is different
Traditional finance relies on banks or institutions.
DeFi operates through blockchain-based systems that allow users to interact directly with financial services.
How DeFi works
DeFi applications are powered by smart contracts.
These are programs stored on a blockchain that automatically execute actions when certain conditions are met.
This allows transactions to occur without manual processing.
Key features of DeFi
- no central authority
- transparent transactions
- accessible globally
- automated processes
Example
A user can lend digital assets through a DeFi platform and earn returns without interacting with a traditional financial institution.
In summary
DeFi enables financial services to operate without intermediaries by using blockchain technology and smart contracts.
Quick Answers
Is DeFi regulated?
DeFi operates differently from traditional finance and may not always follow the same regulatory frameworks.
What powers DeFi applications?
DeFi applications rely on smart contracts on blockchain networks.
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