Understanding decentralized finance

 

Decentralized finance, sometimes called open finance, is a blanket term for financial services such as lending and borrowing, created using decentralized infrastructure, such as smart contracts and blockchains. In 2019, it has quickly emerged as Ethereum’s next big use case after Initial Coin Offerings in 2017. ICOs were the tokens being sold to raise funds for blockchain projects. 


According to a report published by Jubilee Group’s JENCO, a decentralized platform, “utilizing DeFi is more beneficial since users do not have to follow centralized rules. Direct, peer-to-peer exchanges can occur, given that various values are agreed upon irrespective of the current offline values. Dealers or third-party mediators can also be utilized. However, transactional prices are significantly lower than when using traditional and offline institutions.”


By using decentralized technology such as smart contracts, DeFi allows the elimination of middlemen. This is because smart contracts are self-executing contracts made of computer code. So for example, instead of depositing your money to a bank where authority is keeping your money safe, with DeFi, you are in complete control of your money. Whatever you have is with you. You won’t need to worry if someone might lose your money. 

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