Introduction Into Decentralized Finance (DeFI)

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Epilogue

Over the years, Economics has always operated on a Centralized system, which the government controls flow and price of Money. With a Centralized system, it comes with lots of problems that includes, High interest rate, Inflationary pressures, account seizures. Etc. But with a decentralized systems, it's much different.

DeFI is a acrnomny that means "Decentralized Finance", which means is a system where transaction are being carried out with no Central authority controlling it. Decentralized Finance is governed by written codes that act like a Bank. Simply put, DeFi operates with the blockchain as a Peer To Peer financial services.

How Does Decentralized Finance Work?

Decentralized Finance operates with certain cryptocurrencies and it's used to facilitate transaction and it delete the need of third party. DeFi uses smart contract, cryptography and blockchain technology to operate and run their services.

Different Aspects of Decentralised Finance

• Lending and borrowing

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Decentralized Finance provided a new way of lending and borrowing money to users. When a trader lends money on a DeFi platform, he gets a "K token", an amount that represents his interest and principal. When another user tries to borrow that sum of money, they tend to overcollateralize their loan to make sure the loan is paid if they fail. But with DeFi, a trader can obtain loans even when owing collateral. This has really helped traders that's in for the long term.

• Exchanging Currencies

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Decentralized exchange has made it easier for a trader to swap coins and tokens with little or no cost. Investor can assess their portfolio and traders can trade with their money. Uniswap is a type of Decentralized Exchange that allows users to trade and swap numerous types of tokens.

• Derivative Assets

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Derivatives are assets with value gotten from another asset. It can be created by anyone in a platform. It's permissionless and it reduces the risks when hedging. Derivatives are commonly used to access leverage by exploiting speculative opportunities.

• Decentralized Organization

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Decentralized platforms can be built on the decentralised finance. DAO platforms are able to remain anonymous as a result of financial services that DeFi provides. The DAO platforms Identities is preserved as it uses peer to peer as compared to traditional banks that uses identity service.

With all being said, DeFi has really improved the cryptocurrencies world and it's gradually growing in all aspects. Thanks fir reading...⭐

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