4. An Introduction to DeFi
What is DeFi?
Decentralized finance, or DeFi, markets are financial mechanisms that operate on a peer-to-peer system with no middlemen. DeFi exists entirely on blockchain, making it completely trustless and open to anyone. There are no restrictions on who can access it and what they can or can’t do with their money. The entire DeFi ecosystem operates off of smart contracts directly stored on the blockchain. DeFi gives users the ability to truly make the most of their money by giving them full and independent custody over all their digital assets.
Source: CoinDesk
DeFi creates a fair market for all users, regardless of their background. It is accessible to anyone with an Internet connection regardless of location, which removes geographic and economic barriers for users to be able to participate. Due to its blockchain operating system, all of DeFi is completely transparent and open-source; anyone can go and audit a protocol’s code themselves to ensure it’s legitimate, creating a system that is much less susceptible to fraud.
Since DeFi operates peer-to-peer and requires no intermediaries to settle transactions, it is much more cost effective for users, where their only cost is the network fee to process a transaction. DeFi also promotes full self-custody over all your money because it doesn’t require an institution to hold it for you - to interact with a DeFi application, all you need to do is connect your wallet to it and begin making transactions.
The DeFi market is full of financial innovation and is rapidly improving on a daily basis. Below are some of the key offerings of DeFi and how they are far more effective than traditional financial systems.
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