What is Defi?

So I guess the first thing we should ask ourselves is: What in the hell is Defi? You may think this would be an easy thing to explain, but it’s not. Explaining this will depend on who you ask; the definition should be pretty standardized, but this is a very young field, so what we know now may change in the near or distant future. So I will explain Defi as In my terms.

“Decentralize Finance is access to financial products via the blockchain through smart contracts and protocols with no intermediaries or centralize institutions.”

Now, this is my version of it, but to get into more depth and other explanation of what defi is:

According to the Messari definition of defi, “applications on public blockchains aim to create financial services without centralized intermediaries.”

Coingecko refers to defi as: “the movement of building decentralized financial applications that have no central authority and is censorship-free.”

Here are some video explanation just in case:

 

None of these explanations and definitions are the “Official” or end all be all definition. This is because it is a very young space, and as time progresses, things will change. So don’t hold to just one purpose; get the basic concept.

Why is Defi important?

This could be life-changing for many people and society as a whole, from lower fees to a better distribution of wealth. Almost 1.7 billion people have no access to a bank account, and millions more have an account with very high prices. Defi is looking to change all of that. In an anonymous permissionless way. Imagine that you can get a loan, insurance, wired money, among other things, from anywhere in the world, and there would be no credit check, no data gathering or high fees,

Now again, this is not a technical analysis of defi. So I will cut to the chase and give you a brief of what you need to know.

• Most decentralize applications (dapps) in Defi are on the Ethereum blockchain, but there are other dapps on Binance smart chain, Cosmos, Polkadot, Eos, and other.

• Because most popular applications are on the Ethereum network, you will need to purchase ETH to work with them and pay for fees of a transaction, which are called “Gas.” These fees can fluctuate depending on the number of transactions on the ethereum network.

• A lot of the defi projects have Tokens that play a part in the application. You can look at it as a “Stock” that you can ear, buy or use depending on the protocol.

• Defi applications are coming out every day, so you always want to do your research before doing anything. Most applications are not regulated and can get hack so before you put any money into something, you have to know that there is no security, and you can lose it all.

• Sites like Defi pulse and Coingecko, there are also many newsletters like Bankless and the Defiant on substack that you can learn more about.

I hope this is useful to you and again. Defi is a young space, so many changes are coming, so don’t be surprised if this may be obsolete in Months or maybe years, but it gives you a good narrative of that Defi is.