DeFi

DeFi, short for Decentralized Finance, refers to a financial system based on blockchain technology that provides traditional financial services without central institutions such as banks or credit institutions. Transactions and contracts are automated through smart contracts, enhancing trust and transparency.

A key feature of DeFi is decentralization. Instead of conducting financial transactions through central institutions, they are processed directly on public blockchains like Ethereum. Users retain full control over their digital assets, while smart contracts automatically manage transaction processes, such as loans or trading cryptocurrencies.

Another advantage of DeFi is open access. Anyone with an internet connection and a crypto wallet can use DeFi services, regardless of geographic location or creditworthiness. This makes financial services accessible to people who lack access to the traditional banking system.

Example: Through a DeFi platform like Aave, a user can lend cryptocurrencies and earn interest without a bank acting as an intermediary. The smart contract ensures that the transaction is fair and automated.

DeFi is revolutionizing the financial world by eliminating traditional intermediaries and giving users greater control over their finances. At the same time, it presents challenges such as security risks from faulty smart contracts and regulatory uncertainties.