What is DeFi?
DeFi or Decentralized finance is a term used to denote different blockchain applications aimed at disrupting and eliminating financial intermediation. The technology employed in creating DeFi applications allows multiple entities to have a copy of a history of transactions making the records immutable.
The DeFi system is not under the control of a single institution or central authority, which enables it to eliminate the centralization associated with traditional financial markets. Blockchain technology became popular in the process of basic value transfer. However, DeFi plays a crucial role in expanding blockchain usage to create complex financial products. It enables more efficient and secure transactions by eliminating the middleman.
The DeFi applications enable direct connection between market participants. Today’s DeFi ecosystem is composed of applications that offer various financial products such as loans, savings, insurance, trading, investing, etc. A major feature of DeFi is that each participant is responsible for his/her funds, while in a centralized financial system bank or other institution is responsible for the users’ funds.
Due to the features and characteristics of Decentralized finance, it is referred to as an alternative to the traditional financial system. Anyone can access the technology utilized in the DeFi system, allowing them to create and develop relevant applications and products.