DeFi is built on the Ethereum blockchain and uses smart contracts to execute financial transactions. These smart contracts are self-executing contracts that can be programmed to automatically perform transactions when certain conditions are met. They are transparent, immutable and enable real-time settlement of transactions.
One of the most significant benefits of DeFi is its ability to provide financial services to people and businesses who are not served by traditional banking. DeFi is accessible to anyone with an internet connection, and the fees are lower than those charged by banks. This makes DeFi an attractive option for people who live in under-served communities or countries with unstable currencies.
Another advantage of DeFi is its transparency. With traditional banking, customers have to trust their banks to manage their finances ethically and responsibly. With DeFi, all transactions are visible on the blockchain for anyone to see. This ensures that there is no room for fraud or corruption.
DeFi is also changing the way we think about lending and borrowing. With DeFi, loans are decentralized, and anyone can lend or borrow funds without the need for a middleman. This reduces the barriers to entry for borrowers and lowers interest rates for lenders.
One of the most exciting developments in DeFi is the rise of decentralized exchanges (DEXs). DEXs are platforms that allow users to trade cryptocurrencies without relying on a centralized authority. This enables peer-to-peer trading, which reduces the risk of fraud and manipulation.
Overall, DeFi is a breakthrough innovation that is changing banking forever. It is providing financial services to people who are not served by traditional banks, lowering fees, increasing transparency, and reducing the risk of fraud and corruption. As DeFi continues to grow and evolve, we can expect to see even more exciting developments in the world of decentralized finance.