Introduction to Defi - 1
As a former banker and crypto enthusiast, I was very interested in Defi(decentralized finance) from the moment I first encountered it. I warmed to Defi very easily, as I did when I met Steem and made investments in various networks and apps.
Defi refers to financial transactions carried out through decentralized applications. The main features of these transactions are that they do not occur centrally, such as traditional crypto exchanges. Frequent Defi transactions include deposit collection, lending, exchange of coins, and transfer.
Defi is a crypto practice started on the Ethereum network. The first applications in this area appeared about 3 years ago. Pioneering applications include Maker, Aave, and Uniswap. In the last year, it has become the most favorite area of the crypto universe.
In the Defi world, it is a critical issue on which blockchain transactions are performed. I stated that Defi applications first started on the Ethereum network, then Binance Smart Chain helped Defi spread to the masses with low transaction costs. Currently, Polygon stands out with close to zero transaction costs. Of course, the blockchains in which Defi transactions are performed are not just these. There are also financial applications running on networks such as Heco, Tron, Avalanche, Solana. Recently I noticed https://tribaldex.com/ that works on Hive blockchain.
Defi applications have some distinctive features. These features form the strength of the concept. Decentralization makes it difficult for individuals or institutions to abuse the system.
Defi applications usually consist of open-source software. In this way, when a Decentralized Application is written on a topic, others can easily use the same code. The market is currently full of clones of Uniswap and AAVE. In this way, the application ecosystem can grow rapidly, and those who mimic the pioneer application bring innovations and enrich ecosystem practices. The fact that the code is open also facilitates external contributions.
Collaborations have an important place in the world of Defi. By collaborating with others, applications can offer much more attractive opportunities to the end-user.
In banks, authorized employees can make transactions on our accounts. A third party can't move funds in a decentralized finance environment without the user's approval. This feature is provided by wallet applications like Hive Keychain. Metamask, a browser plug-in, is the most popular wallet app. It supports the most widely used networks such as Ethereum, Binance Smart Chain, and Polygon.
Pancakeswap, which runs on the Binance Smart Chain, has contributed much to the Defi world. I also started using Defi by Pancakeswap. With around 250,000 daily users, this swap app provides users with annual returns of up to 500 percent through liquidity pools. Of course, which liquidity pool should be invested in is the subject of a separate article.
Finally, let me talk about how the operation works. So what are the steps for those who will make a Defi investment for the first time?
We buy Ethereum or BNB from a central exchange.
We install a wallet application on our computer (Metamask, etc.)
We send the corresponding cryptocurrency to our wallet from the central exchange. (ETH for Ethereum network, BnB for Binance Smart Network, etc.)
We open the site of the relevant Defi application. We connect our wallet to the site.
We make financial transactions in the app with the money in our wallets.
That's it from me for today; I plan to continue this series of articles in the coming days.
Thanks for reading.
Image Source: https://unsplash.com/photos/iar-afB0QQw and https://giphy.com/
It was interesting to go through your post about decentralized Finance. you have mentioned some important features and information about the defi which is very much helpful for the newbies. the final part of sharing step by step how to start was very helpful. thank you very much for this nice post
Well, these things have to be explained to me with "little drawings" and with pause. Obviously that you as a scholar of these issues digest it more, "I take off my hat" and congratulate you for your knowledge.
Commented by @hojaraskita.