Everyone who invests in cryptocurrency or is associated with the crypto world has heard the buzzword – DeFi. But what actually is it?
DeFi stands for decentralized finance and is an umbrella term for various financial services on public blockchains. Unlike traditional financial services automated by banks and financial institutions, DeFi isn’t controlled by any central service.
The system’s convenience has allowed many users to earn interest, trade derivatives, and perform related tasks easily. No third party or authority is involved. The technology offers high levels of interest and is also secure.
So, investors and traders are slowly dipping their toes into DeFi. If you want to start using Defi, read on to know about all the essentials.
A Brief Introduction About DeFi
DeFi was designed to disrupt traditional financial intermediaries. It uses blockchain technology, and you can find it on the Ethereum platform.
You can consider it a combination of software development, cryptography, and finance, which aims to give you more control over transactions.
With DeFi, you can perform common financial transactions such as buying insurance, borrowing, earning interest, and trading assets. But here is the catch- there is no central authority or third-party company monitoring these operations.
DeFi is a global peer-to-peer technology that is quite fast and isn’t routed by a centralized system. It means that the transactions occur directly between two people, without any external interference. You don’t even have to worry about complicated paperwork!
How Does It Really Stand Apart?
Some users consider DeFi as a virtual alternative to Wall Street. It’s because the technology cuts out many associated expenses, including banker salaries and trading floors.
- As a result, it creates an open, fair and free financial market where anyone with an internet connection can participate.
- One of the key reasons DeFi works conveniently is due to the smart contract functionality of Ethereum. This functionality executes transactions automatically after meeting a certain condition.
- For instance, if you want to send money, you need to fulfill a specific condition, such as validating a receipt.
- Also, you can lend cryptocurrency easily and earn interest. That’s why lending and borrowing cryptocurrency is extremely popular with DeFi. In addition, you can perform other tasks like working as a liquidity provider for a decentralized institution.
You just need to install DeFi apps to see the technology work its magic! The security is top-notch as no mediator is needed, and the apps are based on Blockchain.
How to Get Started on DeFi?
DeFi has become extremely popular over the years due to its high-interest rates, reliability, and flexibility. It offers more interest than traditional banks.
Here is a step-by-step guide on how to get started with DeFi:
Step 1 – Setting Up Your Wallet
To get started, you will need a cryptocurrency wallet installed on your…
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