What is DeFi (Decentralized Finance)?

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What is DeFi (Decentralized Finance)?
Decentralized finance, or also known as DeFi, is
one of the most popular things in the blockchain
and crypto space. Fundamentally, decentralized
finance takes existing financial products and
services such as trading, lending, and borrowing,
and puts them on the blockchain. By moving these
financial products and services on the
blockchain, the central authority is removed from
the equation.
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• But not all of these financial services offered
  on the blockchain are entirely decentralized.
  Some of them are still offered by centralized
  companies. These centralized companies are
  operating on smart contracts so that they can
  offer it on the blockchain. However, these
  centralized companies still dont have much
  control and impact over your funds, compared to
  the traditional centralized authorities, like
  banks and governments. 
• Some suggest that decentralized finance should
  be called non-custodial finance as it is a more
  accurate term. Non-custodial means that you still
  hold the keys to your crypto, not needing to hand
  them over to any intermediaries. With DeFi, you
  have complete control over your crypto while your
  transactions are being carried out through smart
  contracts.

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Understanding decentralized finance

• Decentralized finance, sometimes called open
  finance, is a blanket term for financial services
  such as lending and borrowing, created using
  decentralized infrastructure, such as smart
  contracts and blockchains. In 2019, it has
  quickly emerged as Ethereums next big use case
  after Initial Coin Offerings in 2017. ICOs were
  the tokens being sold to raise funds for
  blockchain projects. 
• According to a report published by Jubilee
  Groups JENCO, a decentralized platform,
  utilizing DeFi is more beneficial since users do
  not have to follow centralized rules. Direct,
  peer-to-peer exchanges can occur, given that
  various values are agreed upon irrespective of
  the current offline values. Dealers or
  third-party mediators can also be utilized.
  However, transactional prices are significantly
  lower than when using traditional and offline
  institutions.
• By using decentralized technology such as smart
  contracts, DeFi allows the elimination of
  middlemen. This is because smart contracts are
  self-executing contracts made of computer code.
  So for example, instead of depositing your money
  to a bank where authority is keeping your money
  safe, with DeFi, you are in complete control of
  your money. Whatever you have is with you. You
  wont need to worry if someone might lose your
  money.

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How decentralized finance works

• Decentralized services are created on the
  Etherium (ETH) blockchain, where financial
  services are accomplished by smart contracts. But
  what do smart contracts do? Here are some of
  them 
• Removes any intermediaries or middlemen from the
  equation. This means that transaction costs and
  fees will be lower. It will also lessen any
  delays in a financial transaction. With smart
  contracts, it is possible for parties to exchange
  anything of value without needing to go to a
  centralized institution. 
• Solves the trust issue. In financial exchanges,
  theres always a question of trust between
  parties. Someone must always take the first step,
  but this means that they are putting themselves
  at risk. Smart contracts fix this problem by only
  executing once all parties have done their part. 
• Allows custom rule criteria. Smart contracts
  transactions are programmable. Users can create
  transactions that can only be completed if all
  the preset rules are fulfilled. 
• Transactions are more transparent and secure.
  With smart contracts, the level of transparency
  is increased. Because of that, it is easier to
  trust other parties involved in transactions. All
  transactions carried out by smart contracts are
  recorded on the blockchain. 

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Conclusion

• Decentralized finance can possibly solve the
  current challenges in the financial system,
  giving the power back to the people by creating a
  more accessible, efficient, and transparent
  system. This is an exciting development for the
  blockchain space that can bring financial
  products and services to anyone, anywhere in the
  world.