Here’s what to know about Decentralized Finance (DeFi) in cryptocurrency

What is Decentralized Finance (DeFi)?

DeFi is a collective term for financial products and services that are accessible to anyone who can use Ethereum — anyone with an internet connection. With DeFi, the markets are always open and there are no centralized authorities who can block payments or deny you access to anything. Services that were previously slow and at risk of human error are automatic and safer now that they’re handled by code that anyone can inspect and scrutinize.

Decentralized Exchanges is one of the most popular DeFi applications

DeFi Vs Traditional finance

How does it work?

Users typically engage with DeFi via software called Dapps (“decentralized apps”), most of which currently run on the Ethereum blockchain. Unlike a conventional bank, there is no application to fill out or account to open.

What can you do with DeFi?

  1. Trade tokens
  2. Grow your portfolio
  3. Fund your ideas
  4. Buy insurance
  5. Start crypto savings
  6. Send money around the globe
  7. Access stable currencies
  8. Borrow without collateral
  9. Manage your portfolio

What are the downsides?

  • Fluctuating transaction rates on the Ethereum blockchain mean that active trading can get expensive.
  • Depending on which Dapps you use and how you use them, your investment could experience high volatility — this is, after all, new tech.
  • You have to maintain your own records for tax purposes. Regulations can vary from region to region.

Ref — https://ethereum.org/en/defi/#defi-vs-tradfi
https://www.coinbase.com/learn/crypto-basics/what-is-defi

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thejosephkalu

thejosephkalu

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Product designer for Fintech and Cryptocurrency | Actively invested in building Web 3 and the MetaVerse