3 minutes to (finally!) Understand DeFi, Decentralized Finance!

DeFi is a fairly recent term that is frequently encountered when it comes to crypto-currencies and blockchains. As a reminder, crypto-currency is a digital currency-not having a physical existence, but being purely virtual-decentralized nand not dependent on a financial organization specifically as the Central Bank. As for the blockchain, it is a technology that allows the storage and transmission of data in a simultaneous, secure, transparent and without the intervention of a central control body.

So what is DeFi in all this? How does it work and what is its sound utility ?

Definition of DeFi Crypto

DeFi is the diminutive of “Decentralized Finance” which literally means “decentralized finance. In other words, DeFi brings together financial services that function in a decentralized way, that is, they rely on public blockchains. Note that the most commonly used blockchain is currently called Ethereum.

DeFi offers classic banking services, such as the possibility of loan contractde sign up for insurance ou to save et perceive of interests. What distinguishes this system from traditional banking services lies in the level of the following steps:

  • Much more rapidessee instantaneous;
  • Simplified without the need for paperwork of any kind;
  • Without intermediaries like a bank advisor;
  • Less loved ones with fees moindres.

DeFi Crypto how does it work?

The operating principle of the Defi is quite simple and complex at the same time. The system uses crypto-currencies, smart contracts and DApps. Knowing that crypto-currencies are the main currency of transactions in DeFi.

Smart contracts are actions that take place automatically when certain conditions are met. This technology delete intermediaries in transactions. In order to coordinate the operation of the system, DeFi also uses DApps or decentralized applications that are based on the blockchain. One of the most frequently used DApps is the digital wallet in that crypto-currencies are stored after transactions.

What is the DeFi crypto-currency?

DeFi has a multitude of possible uses. Here are some uses that are limited in the field of financial services:

  • Obtaining a loan : if you need financial resources, DeFi allows you to get it easily and quickly without going through the traditional bank;
  • Making a savings : thanks to DeFi, you can save your crypto-currencies in order to obtain regular interests and make your investment profitable;
  • Negotiation of cryptographic assets : it is also possible to buy, sell and exchange your crypto-currencies in pairs without going through intermediaries.

Who uses Decentralized Finance and why?

As you can see, DeFi addresses itself also to private companies. It is useful to all those who intend to use financial services in a decentralized way and makes no distinction between users. Moreover, the objective of this technology is to gradually replace the current financial system which can be complex, slow and too restrictive.

Conclusion: let’s recap the DeFi!

To recap, DeFi is a version modernized of the banking and financial system as we know it now. This ecosystem is still young and he shall be brought to to evolve to be perfect in the stream of time. In a few years, it is likely that decentralized finance will turn transactions into fiduciary currency obsolete.

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