DeFi is powered by decentralized applications, or dApps, which are built on top of public blockchain networks such as Ethereum, Tron, and EOS. These dApps are open source, meaning anyone can access and use them. They are also trustless, meaning users don’t have to trust any third-party to use them.
The rise of DeFi has been driven by a number of factors, including the increasing popularity of cryptocurrencies, the growing demand for financial services, and the need for an alternative to traditional banking. DeFi offers users access to a range of financial services, such as lending, trading, and insurance, without the need for a centralized authority. This means users can access these services without having to trust a third-party with their funds or data.
The DeFi ecosystem is still in its infancy, but it has already seen tremendous growth over the past few years. According to DeFi Pulse, the total value locked in DeFi protocols has grown from $1.2 billion in January 2020 to over $50 billion as of February 2021. This growth has been driven by a number of factors, including the emergence of new protocols, the launch of new products, and increased investor interest.
The growth of DeFi has also been fueled by the development of new technologies and tools. For example, decentralized exchanges (DEXs) allow users to trade digital assets without having to trust a centralized exchange. Similarly, decentralized finance protocols such as MakerDAO and Compound provide users with access to lending and borrowing services.
The rise of DeFi is transforming the way financial services are provided. By leveraging blockchain technology, DeFi is providing users with access to a range of services that are more decentralized, transparent, and secure than traditional financial services. As the industry continues to grow, it is likely that DeFi will become an increasingly important part of the global financial system.