What is DeFi?

Definition of DeFi

Alex avatar
Written by Alex
Updated over a week ago

Decentralized finance or DeFi is an alternative finance system using mechanisms that disrupt traditional finance and challenge the current centralized banking system by introducing some key features that significantly improve the entire financial ecosystem.

The major advantage is that Decentralized finance allows people, merchants and businesses to process financial transactions through blockchain technology eliminating the need for a third party/intermediary (for example banks).

Wherever there is an internet connection, individuals can lend, trade and borrow using technology that records and verifies transactions in distributed financial databases. A distributed database is accessible across various locations as it collects and aggregates data from all users and uses a consensus mechanism to verify it and ultimately approve it.

DeFi applications give users more control over their money through personal wallets and trading services suitable to individuals.

DeFi also eliminates the fees that banks and other financial companies charge for using their services. Individuals hold their money in a secure digital wallet that can be accessed instantly and can transfer funds in seconds anywhere, anytime.

Did this answer your question?