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Decentralized Finance, also known as DeFi, is a quickly evolving and increasingly integral part of the blockchain space, especially on the Ethereum protocol. If proponents are correct, the technology could lead to greater financial autonomy among users while undercutting financial rent-seekers and reducing costs. During a time of unprecedented monetary policy and limitless quantitative easing, such an accomplishment has implications far beyond Ethereum and the DeFi space.
Over the last year, the term “DeFi” has caused quite a stir in the decentralized community. Many in the community believe that DeFi, or decentralized finance, can completely turn the global economy on its head by making the finance sector transparent and more easily accessible. The DeFi movement leverages decentralized networks to transform old financial products into trustless and transparent protocols that run without intermediaries:
The pitfalls of traditional finance.
What is DeFi, and why do we need it?
DeFi use-cases and applications.
What is DeFi (Decentralized Finance)?
Decentralized Finance, more popularly known as DeFi, is an umbrella term for the next-generation financial applications ecosystem currently emerging. What sets the DeFi field apart from traditional finance applications is that it employs public blockchain technology. This is the same technology underpinning cryptocurrencies, and has become hotter than ever in past years.
DeFi, which is sometimes known as “open finance”, encompasses a broad variety of various subjects. To name a few, these include decentralized exchanges, decentralized stablecoins, decentralized money markets, decentralized synthetics and decentralized insurance.
This can all be a lot to take in. No matter what, it is clear that the most important takeaway is that the various applications in the DeFi field are decentralized. You might have heard about decentralization in relation to blockchain technology or cryptocurrencies - but what does it mean?
Decentralized Finance (DeFi) is all about creating an open-source, permissionless, transparent, financial ecosystem available to anyone with an internet connection.
Compound Finance rocketed to preeminence recently as the new DeFi darling with its COMP governance token seeing massive gains. This spate of wild speculation has been accompanied not only by more traders piling on but also by funny memes and videos featuring Yield Farmers harvesting their lucrative crops.
The Kyber Network offers a way to swap ETH and other ERC-20 tokens instantly without a centralized exchange (CEX). Kyber’s popularity has soared in 2020. In fact, the popularity of Decentralized Finance (DeFi) as a whole has. Just look at how the total value locked in US dollars has grown over the past few years:
One of the many fields of the economy that is ripe for disruption by the blockchain is the finance field. Virtually every part of the finance industry that traditional finance companies operate in is under threat from the blockchain. Over the last few months, the DeFi space market cap has risen dramatically, and this trend is set to continue over the coming years.
While token prices in the crypto market have been sleepily drifting sideways, for the most part, decentralized finance (DeFi) has been pumping and is currently the most exciting place to be. And decentralized exchanges (DEXs) are part of that ecosystem.
Decentralized Finance, more commonly known as DeFi, is one of the hottest areas in the blockchain sector. In fact, some argue the growing interest in DeFi solutions highlights the crypto industry’s increasing maturity.
