INTRODUCTION TO DEFI
Hello STEEMIANS, trust you are having a good time, so today I'll be talking about DeFi. In coming days I will be posting about web3, so this is the first writeup in this thread. These threads will be for anyone who don't know the first thing about web3.
What You Need to Know About DeFi
Decentralized Finance, or DeFi, is one of the most transformative innovations in the financial world. It represents a shift from traditional, centralized financial systems to decentralized networks that operate on blockchain technology.
What Is DeFi?
🔵Decentralized Finance (DeFi): DeFi refers to a broad range of financial services and products that are built on blockchain networks, like; Ethereum, Solana and the likes. Unlike traditional finance, which relies on centralized institutions like banks and brokerages, DeFi operates without intermediaries, allowing users to interact directly with each other through smart contracts.
CORE PRINCIPLES OF DEFI
🔵Decentralization: No single entity controls the network. Instead, it is governed by code and protocols that run autonomously on the blockchain.
🔵Transparency: All transactions and processes are visible on the blockchain, allowing for greater transparency and accountability.
🔵Accessibility: DeFi is open to anyone with an internet connection, removing many of the barriers associated with traditional financial systems.
HOW DEFI DIFFERS FROM TRADITIONAL FINANCE
-Intermediaries:
🔵Traditional Finance: Requires intermediaries such as banks, payment processors, and brokers to facilitate transactions.
🔵 DeFi: Eliminates intermediaries, enabling peer-to-peer transactions through smart contracts.
-Control:
🔵 Traditional Finance: Centralized institutions have control over your funds, and transactions can be subject to delays or restrictions.
🔵DeFi: Users have full control over their assets, and transactions are executed automatically by smart contracts without the need for approval from a central authority.
-Innovation:
🔵Traditional Finance: Innovation is often slow, constrained by regulatory frameworks and legacy systems.
🔵DeFi: Innovation is rapid, with new protocols and products being developed constantly, offering users a wide array of financial services from lending and borrowing to trading and investing.