DeFi, or Decentralized Finance, is a relatively new area of the cryptocurrency world that aims to sustainably transform the financial services industry, primarily by eliminating financial intermediaries. Find out in this article what DeFi is, what are its most popular applications and how you can benefit from it.
DeFi – What is it?
DeFi, Decentralized Finance or Decentralized Finance, brings together many decentralized applications (dApps) based on the blockchain and aimed at reshaping the access and use of traditional banking and financial tools and services.
The central idea is to create a decentralized and transparent alternative financial and monetary system to transcend the limits of the current system by giving control back to users through the elimination of intermediaries or central control bodies.
Since it is based on the blockchain, DeFi offers peer-to-peer and decentralized banking and financial services. They are therefore without intermediary, instantaneous, immutable, transparent, much faster and less expensive than traditional services.
The Different Types of DeFi Applications :
Many types of applications have emerged with decentralized finance, which allow individuals to take advantage of new or already existing services, but this time without intermediaries and at unbeatable prices. We return here to the main applications of DeFi.
Borrowing & lending platforms:
These platforms use smart contracts to manage borrowing and lending transactions automatically and without intermediaries (you can easily and quickly borrow crypto funds or earn interest by lending your crypto currencies).
Instant loans (flash loans) :
These instant loans without consideration are repaid in a single transaction.
Decentralized Exchanges (DEX):
These platforms act as an online exchange connecting buyers and sellers of digital currencies.
This is the action of immobilizing a certain amount of tokens to obtain passive income, much like a savings account.
Stablecoins are cryptocurrencies with a stable value tied to another asset, usually a popular fiat currency like the US dollar.
This is the optimization of the returns of your investments in crypto currencies via several strategies of staking and loans.
Trading of tokenized products:
This is the possibility of trading in a decentralized way derivative products or tokens representing assets such as shares for example.
It is the monetization of one’s ability to predict a future outcome or event.
Interoperability & Composability:
It is the ability to choose and assemble certain components of several dApps to create a new one.