DeFi (decentralized finance) refers to a set of financial services built on public blockchains. According to Binance Academy, DeFi utilizes decentralized networks and open-source software to create services such as lending, borrowing, decentralized exchanges, derivatives markets, etc. Among the most popular services, we can mention:
DApps, or decentralized financial applications
Peer-to-peer (P2P) protocols, particularly permissionless blockchains
Identity verification (KYC)
AML, or anti-money laundering
A simple idea for great changes
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The central idea of DeFi is to eliminate traditional intermediaries such as banks or institutions, to empower smart contracts. This reduces costs, increases transparency, and offers access to everyone, without high barriers to entry. Your wallet will thank you!
But DeFi is not without risk: Binance Academy emphasizes that you should do your own research (DYOR) before any investment. Indeed, despite the unprecedented security of the decentralized system, you may encounter risky business models. Additionally, malicious actors can insert vulnerabilities or bugs into existing protocols.
What to remember?
DeFi is the finance of tomorrow!
It is more open, more transparent, and driven by smart contracts.
Your cheat sheet
💡 What is DeFi?
🌐 It is decentralized finance: you can borrow, lend, and even invest without an intermediary.
📚 To take advantage of its benefits, you need to understand market dynamics before acting!