DeFi or Decentralized Finance is a collective term used for financial applications and systems of the modern age, built under Ethereum and blockchain technologies. The main motive behind Defi is to allow consumers to take control of their money instead of transferring the control to banks and financial institutions. Just like Blockchain, DeFi aims at disrupting the centralized financial systems and promoting the decentralized system. 

ethereum defi

The Crypto industry is already booming, and Defi has added another option in the ecosystem for diverse users worldwide. We are slowly but definitely moving towards the day where all big transactions will be made using digital currencies. Defi will let us control our money, and no central authority will be able to block our payments or deny us access to our own money. That’s the key advantage of Defi.

In a nutshell, Defi is what a traditional finance system can never be. It is Blockchain’s answer to traditional finance in the age of the internet and digital payments. 

Advantages of Defi over Traditional Finance

  • You are in control of your money
  • Faster and Safer Transactions
  • Open to Everyone
  • 24/7 Market
  • Complete Transparency in the Market

Defi is Bitcoin and much more.

If you haven’t understood the concept yet, this will certainly help. Bitcoin is probably the first Defi application. Suppose you look at the working of Bitcoin. In that case, it fulfills almost all the requirements that a system must fulfill to be called a Defi application. While trading in Bitcoin, it is you who control the currency. You can send it anywhere in the world. Anyone can buy Bitcoin, and every information, such as the limited availability of Bitcoin, is available publicly. 

But Defi is not just limited to Bitcoin. Just like Bitcoin, Ethereum is also inspired by a similar concept. The rules are the same for everyone, and everyone has access to digital currency. This makes space for programmable digital currency.

Also Read, Crypto Enthusiasts Should Pay Heed to Non Fungible Tokens (NFTs). Here’s Why

Yes, digital currency can be made programmable. It is made possible using smart contracts. The application of smart contracts is not just limited to making digital currency programmable. It can also be used in other real-life applications like designing highly secured voting systems.

decentralized finance

Why Programmable Money?

A question that might bother you is… “Why should money be made programmable?” To start with, most of the tokens in the Ethereum ecosystem are programmable by default. Making a digital currency programmable means infusing a certain login into it. Making digital currency programmable not just lets you control your money but also makes you in charge of its security and widens the scope for what can be done using digital currency. This includes tasks like lending, borrowing, investing in index funds, etc.

Things You Can Do With Defi

  • International Transactions
  • Savings In Crypto
  • Access Stable Currencies
  • Funding For Your Business Ideas
  • Borrowing Funds

How Does Defi Work?

Defi eradicates the need for intermediaries to provide a service. It simply uses cryptocurrencies and smart contracts for providing services. In the financial system, the intermediaries are governments and financial institutions. But cryptocurrency doesn’t require intermediaries, shifting the control in the hands of consumers. 

decentralized finance defi

What financial institutions do in a traditional financial system, smart contracts do in Defi. A Smart Contract is nothing but an Ethereum account that can hold funds and send them if needed. Smart contract works as per programmed and hence, explains the advantage of “programmable digital currency.” Once the smart contract goes live, it can’t be altered, which makes Defi so secure. 

Top DeFi Tokens By Market Capitalization

  1. Uniswap (UNI) – Current Price ~ $22
  2. Chainlink (LINK) – Current Price ~ $26.1
  3. DAI (DAI) – Current Price ~ $1
  4. 0x (ZRX) – Current Price ~ $0.98
  5. Maker (MKR) – Current Price ~ $2762