Blockchain/Web3 101 | What is DeFi?

DeFi stands for Decentralized Finance. It's a new way of using financial services (like lending, borrowing, and trading) without needing traditional banks or financial institutions. Instead, DeFi operates on blockchains.

Key Concepts of DeFi:

• No Middlemen: In traditional finance, banks or companies act as intermediaries. DeFi removes them, allowing users to directly control their money and transactions.

• Smart Contracts: These are self-executing contracts on the blockchain. For example, if you borrow money, a smart contract will automatically enforce repayment terms without needing a bank.

• Decentralized Applications (dApps): DeFi runs on dApps, which are decentralized apps built on blockchains. These apps let you do things like trade cryptocurrencies, earn interest on your assets, or borrow/lend without needing to trust a central authority.

• Transparency and Accessibility: DeFi is open to anyone with an internet connection, and all transactions are recorded on the blockchain, making them transparent and verifiable.

Common DeFi Services:

• Lending and Borrowing: Users can lend their crypto to earn interest or borrow against their assets, often without needing credit checks.

• Decentralized Exchanges (DEXs): Platforms where people can trade cryptocurrencies directly with each other, without using a centralized exchange.

• Stablecoins: Cryptocurrencies that are pegged to real-world assets like the US dollar to reduce price volatility.

• Yield Farming: A way to earn rewards by providing liquidity to DeFi protocols (helping to support the system by locking in your assets).