People are talking about it in the cryptocurrency world. But what exactly is DeFi? Now, let’s dive in so you don’t miss out on the topic that everybody is talking about at the moment.
The term “Decentralized Finance” (DeFi) itself was founded by a group of influencers back in August 2018. Their main idea is to create a financial system that is transparent and open to the public. Or they would prefer to describe it as an “Open Finance” to be more precise. Which is contrary to the traditional financial system that we are familiar with, where it’s not for the public eyes to see. There is nothing wrong with it, it’s just like walking into one of those Chinese restaurants and you see the kitchen covered in glass so you can see how your dish is made and served by the chef. But some restaurants just prefer their kitchens to be private. Either way, there is no difference in which one is the right one. It’s just an innovation from the previous system.
The DeFi movement is arguably one of the most promising markets in the financial technology sector nowadays, it implements over 100 DeFi applications on Ethereum, ranging from decentralized exchanges and lending protocols to trustless derivatives trading platforms and yield-generating liquidity pools.
But according to DeFi Pulse, the “Lending” segment is the largest single segment of DeFi at $3.7 billion. The growth market in DeFi lending and borrowing, often referred to as money market protocols have been dominant. This represents just over half of the total $7.1 billion in value currently locked in DeFi. There are several DeFi lending platforms you may like to know. Uniswap, Maker, and Aave.
DeFi is a relatively new technology and even though it’s high-tech, its still in the early phase .“With great power, comes great responsibility.”. DeFi is based on Smart Contracts, and one of the things that can go wrong in DeFi are scams and hacks. It is essential to protect yourself and make sure your digital assets are properly stored and insured. So, there are still some risks.
Learn more about DeFi from the Pros & Cons, The future of DeFi itself and much more in this month’s blogs and podcasts!