What is Defi? 2020 can be said to be a very successful year for Defi, this topic is hotter than ever. So what is the potential of defi in the future?
1 – What is Defi?
Defi stands for the phrase Decentralized Finance which means decentralized finance or open finance.
Decentralized Finance leverages the power of decentralized and transparent blockchain technology to create an open finance platform. Users can access and use anywhere and anytime.
Decentralized Finance is not under the centralized management of any powerful individual or organization. This reduces the manipulation or fraud of the centrally managed organization.
In short, the term “Defi” refers to financial applications developed and built on blockchain technology.
2 – What purpose was Defi born for?
Traditional finance we all know is managed by government and banks. This means that your money is controlled by a powerful institution.
Money is often inflated when institutions print too much.
It is for these two reasons that Defi was born with the aim of creating a decentralized financial platform that helps users fully control their money.
3 – How Defi Works
Defi financial applications (dApps) are operated based on the terms and agreements of the Smart contract (smart contract).
When dApps are deployed, the transactions between the parties are handled completely automatically by smart contracts without human intervention.
Decentralized Finance is built on blockchain technology. Due to the transparent public nature of blockchain, transactions on dApps are also public on the platform.
However, it still ensures the privacy of the trader by hiding the identities of the transactions.
4 – Benefits
Eliminate censorship and manipulation by powerful institutions.
Fast and low-cost transactions are based on the principle of smart contracts, so it is difficult to cheat.
Users have complete control over their assets without being managed by a 3rd party.
Transaction transparency reduces the risks of market manipulation or fraud from a powerful institution.
5 – Popular Defi Apps
Hubi Finance Chain.
6 – Defi’s potential in the future
In the past 2 years Decentralized Finance has grown x15 times, although there are still many downsides.
2.2020 already has about ~ethereum (ETH) locked in dApps. Most of the real products lending sector grows the strongest and fastest.
Decentralized Finance is currently being adopted by many large organizations in the financial sector, which shows that the future of Decentralized Finance still has potential.