What is DeFi (Decentralized Finance)?

by | Sep 3, 2021 | Financing | 0 comments

Lesson Plan For The Future

Blockchain – Digital Currencies (Bitcoin, Etherium, Cardano, NFTs, etc) – Digital Financial System – Digital Economy – Digital Ecosystem

What is DeFi (Decentralized Finance)?

DeFi (or “decentralized finance”) is an umbrella term for financial services on public blockchains, primarily Ethereum. With DeFi, you can do most of the things that banks support — earn interest, borrow, lend, buy insurance, trade derivatives, trade assets like the VT markets, and more — but it’s faster and doesn’t require paperwork or a third party. As with crypto generally, DeFi is global, peer-to-peer (meaning directly between two people, not routed through a centralized system), pseudonymous, and open to all.

Why is DeFi important?
What are the benefits?
How does it work?
What are the downsides?

Here are some of the ways people are engaging with DeFi today:

Lending: Lend out your crypto and earn interest and rewards every minute – not once per month.

Getting a loan: Obtain a loan instantly without filling in paperwork, including extremely short-term “flash loans” that traditional financial institutions don’t offer.

Trading: Make peer-to-peer trades of certain crypto assets — as if you could buy and sell stocks without any kind of brokerage.

Saving for the future: Put some of your crypto into savings account alternatives and earn better interest rates than you’d typically get from a bank.

Buying derivatives: Make long or short bets on certain assets. Think of these as the crypto version of stock options or futures contracts.

Coinbase is a great source for educational content around this subject. If you haven’t already, give it a look.

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