What is DeFi?
In its simplest form, decentralized finance is a financial system where products and services are available on a public blockchain network and accessible to anyone, without the need for intermediaries such as banks or brokerages.
Unlike traditional financial accounts, DeFi does not require government-issued identification, Social Security numbers, or proof of address. This system enables direct peer-to-peer interactions between buyers, sellers, lenders, and borrowers using software-based agreements known as smart contracts, rather than relying on a company or institution to facilitate transactions.
To achieve decentralization, DeFi utilizes a combination of open-source technologies, blockchain, and proprietary software. Smart contracts are a key component of DeFi, as they automatically execute the terms of agreements between transacting parties.
This eliminates the need for intermediaries and streamlines the transaction process. While the volume of trading and money locked into DeFi systems is steadily growing, it is still an emerging industry and its infrastructure is still being developed. Currently, DeFi operates with minimal to no regulation or oversight. However, it is expected that in the future, DeFi will become a major player in the financial industry and may even replace traditional rails of finance.
