Decentralized finance (DeFi) is a movement in the world of cryptocurrency that aims to create financial services that are open, accessible, and built on blockchain technology. DeFi applications, also known as “smart contracts,” run on decentralized networks like Ethereum, which allows them to operate without the need for a central authority or intermediary. This means that they can be used by anyone, anywhere, without the need for permission or approval.
DeFi applications can be used for a variety of financial services, including lending, borrowing, trading, and insurance. They can also be used for more advanced financial instruments like derivatives, prediction markets, and stablecoins. These applications are typically built using smart contracts, which are self-executing contracts with the terms of the agreement written directly into the code.
One of the key benefits of DeFi is that it allows for greater financial inclusion, as anyone with an internet connection can access these services. Additionally, DeFi applications are generally more transparent and secure than traditional financial services, as all transactions are recorded on a public blockchain.
Some examples of DeFi projects include MakerDAO, Aave, Compound, Uniswap, and Chainlink. These projects have gained a lot of popularity and have seen significant growth in recent years, with the total value locked in DeFi reaching over $50 billion in 2021.
However, it’s important to note that the DeFi space is still relatively new and highly experimental, and as such it is important to be aware of the risks involved in using these applications, such as smart contract bugs, regulatory risks, and liquidity risks.