Distributed finance, often abbreviated as DeFi, refers to a system where financial transactions and services are conducted on decentralized platforms using blockchain technology. In DeFi, traditional intermediaries like banks or brokers are eliminated, allowing users to interact directly with each other. This creates a more transparent, secure, and efficient financial ecosystem.
One of the key features of distributed finance is the use of smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. These smart contracts automate and enforce transactions, eliminating the need for a third party to oversee the process. This not only reduces costs and time but also decreases the risk of fraud or manipulation.
DeFi offers a wide range of financial services, including lending, borrowing, trading, asset management, and more, all without relying on centralized institutions. Users can access these services through decentralized applications (DApps) that are built on blockchain networks like Ethereum. These applications provide open access to anyone with an internet connection and a crypto wallet, democratizing financial services and promoting financial inclusion.
