What is Decentralized Finance?

We all know how bank finances work.

A new addition to digital banking is the newest concept of decentralized finance gaining quite the traction lately due to its unique and simplified nature of transaction.

Decentralised finance is a financial application which is built on blockchain technology that enables digital transactions between peer to peer or multiple parties.

It is an open and global transaction system that controls your assets. Defi is a financial product or service which uses the Ethereum network.

Since it is decentralised in nature, there is no central control and it gives access to transactions happening at any time without worrying about the human errors.

It is now inarguable that the crypto-economy is rising day by day.

Johann Kerbrat, Robinhood Crypto CTO, told Fortune — “Just like the internet enabled the free transfer of information, DeFi aims to enable the transfer of value in an open, transparent, auditable system that doesn’t need any centralized 3rd party or gatekeeper — but just the agreement of two parties,

Difference between Defi and traditional finance :

The major difference between Defi and traditional Finance is transaction time.

To transfer the funds, DeFi takes minutes while a traditional finance system might take days to complete the transaction.

DeFi market is always open while traditional finance is manual and has limited working hours for completing your transaction.

DeFi works with utmost transparency. Anyone can see the transaction and check the details which is not the case with traditional finance systems.

You can borrow, lend, earn interest, trade or do anything with a cryptocurrency. You will require a?crypto wallet?and internet access. However, if you forget the password, there is no way to recover it hence it is very very important to handle your password with care.

Ways to use DeFi :

1. Send money from one corner of the world?— Like bitcoin, Ethereum has the power to send money within a few minutes and in the easiest way. It uses ‘smart contracts’, making DeFi transactions even more secure and transparent.
2. Borrowing without hustle?— In decentralized finance, borrowing money can happen in two ways. One is ‘peer to peer’ which means borrowing money from one particular lender. The other method is ‘pool-based borrowing’ where lenders lend money to the pool and the borrower can borrow from the pool.
3. Savings with cryptocurrency?— DeFi can help you to start saving with crypto through various methods and the most popular is to lend money. Another popular way is called No loss lotteries which are more like a pool together as a way of saving money.
4. Token Exchange?— while traveling to various countries, you can exchange your local currency with their native currency. The only thing is they have limited currency exchange hours. In the Ethereum network, there are many tokens and Defi is always open so you can exchange your token at any time.

DeFi is certainly making its way in the cryptocurrency market. We would like to hear your thoughts about DeFi, let us know in the comment section if you would like to read more about this topic in detail, we will be happy to answer.