DECENTRALIZED FINANCE (DE-FI) ON BLOCKCHAIN NETWORK

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Hello everyone,
Hope you all doing well? I will be talking about decentralized finance (De-Fi) on blockchain networks. To begin to understand decentralized finance let's first look at its literal meaning of it. Decentralized, we say something is decentralized when its activities and function are performed by anyone with any supervision or answering to authority. Finance also has to do with money, banking, debt, credit, and any other thing related to spending. With that being, said let’s get to the point.

What is Decentralized Finance (De-Fi) in Cryptocurrency??

Decentralized finance (De-Fi) is a blockchain-based financial application that uses smart contracts to perform transactions without the need for an intermediary or a third party to validate the transactions. These smart contracts are self-executing contracts of computer code, which remove the need for intermediaries. Decentralized finance also consists of peer-to-peer protocols that a built on decentralized blockchain and have no access to De-Fi tools. Decentralized finance aims at creating a whole new financial ecosystem that is open to everyone. Some of the things included in this financial system are lending and borrowing, stablecoins, decentralized exchanges, and many others. Let's look at some of those financial services in the ecosystem

Lending and Borrowing

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Decentralized finance developed the lending and borrowing financial service with the aim of helping users and at the same time building a more stable cryptocurrency community. Decentralized lending gives the users the opportunity to gain annual yields and decentralized borrowing allows users to be able to borrow money at specific rates. Decentralized finance renders the lending and borrowing financial service through the use of projects under the ecosystem some of the projects are:

1. Compound finance.

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This project is mainly a lending project developed on the blockchain network to allow users to gain interest by lending out their assets. Compound finance also makes it possible to create liquidity for cryptocurrencies by setting interest rates using algorithms. Compound finance is the biggest lending project with around 630 million dollars worth of assets locked in the protocol. I also allow users to supply assets to make interests and these assets can also be used as collateral to borrow other assets.

2. Stable coins.

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Stable coin is an important part of the De-Fi ecosystem. They solve the issue of volatility surrounding cryptocurrencies because of their value being tied to stable assets in the world like the US dollar, Gold, and other stable assets. They also help De-Fi gain prominence and play a significant role in the liquidity pools. Stable coins come in handy in situations where there is a high risk involved in a transaction as they can be relied on as stable collateral.

Decentralized Exchanges (DEx).

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Decentralized exchanges are one of the most important functions in the De-Fi protocol in respect to the amount of capital locked in it compare to the other De-Fi protocols. DExs allows users to exchange tokens with other users without a centralized intermediary. One of the main decentralized exchanges (DEx) is:

1. Uniswap.

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Uniswap is one of the largest automated token exchanges deployed on the blockchain network for trading large volumes of tokens. Uniswap enables users to exchange tokens easily without paying charges on any platform or dealing with an intermediary.

I think decentralized finance could really help many users, if they are able to make use of some of the projects in their ecosystem, they can make huge profits out of lending and the other DExs. Thank you for reading through.