DeFi in simple words.

rupok (80)in Steem Alliance • 2 years ago

Hi all my friends of this wonderful community. How are you all? I am fine by the grace of Almighty Allah. I hope you are also doing good.

The full form DEFI is decentralized finance. We usually rely on the conventional institutions for money transactions. They are all centralized finance. That is, they are controlled by one or more people. But in decentralized finance there is no such problem. Here you are the owner of your asset. In today's post I will try to explain in simple words what is Decentralized Finance.

Nowadays, due to scams at various banks and crypto exchanges, people are interested to know what DeFi is and how it can benefit them. If you have crypto assets and want to generate some income safely then DeFi is the safest place for you. Let me explain in simple terms. Suppose you have some money and you keep that money in the bank for monthly or yearly profit. Again the bank lending that money to another person at high interest. But here, after you give money to the bank, there is no chance to know where it went? Or how much profit the bank is making by investing your money. You cannot know that.

But there is no such problem in Defi. Let me explain the matter a little more clearly. Suppose you have some crypto assets . You want to invest it somewhere safe and earn some profit . Another person also has some crypto assets. He needs some money. But he doesn't want to sell his crypto assets. In that case he can deposit his crypto assets in DeFI and take some loan from DeFI smart contract in exchange of interest . When his needs are over, he returns the money and he will get his crypto Assets back . DeFi Smart Contract will work to mediate between these two parties.

In this case the crypto assets I am depositing in DFI Smart Contracts. I will be able to see and know who my crypto asset is going to and how much profit I am getting from it. And the entire profit will come to me. To withdraw money from the bank, you have to comply with various conditions and will have to take permission from various agencies. With Defi you don't have to face any such formalities.

You will earn profits by depositing your crypto assets into smart contracts. Again, if you need your money, you can deposit your crypto asset and borrow money from it in exchange for profit. As in normal banking system people of one country cannot take loans from banks of other countries. But in this case any person from any part of the world can take a loan or invest his money and earn profit through Defi Smart Contract. And here you have no chance of missing out on a little asset. Because here you will have full control of your assets.

You have to fill various forms like to take a loan from a normal bank. Various documents are required. For Defi You don't have to face any such problem. In normal banking system such as bank holidays or weekly closures. Defy has no such problem. That's why it's safe to say that DeFi is going to be one of the most important parts of the modern financial system.

That's all from me. Hope to see you in the next post. Till then it’s good bye.

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