Decentralized FinanceDecentralized Finance

Basics and Concepts of DeFi

 If we talk about a few decades ago, there was no any concept of DeFi (Decentralized Finance), instead the centralized finance concept was utilized by the controlling authorities that manage the move of money. It managed by the government as well as also by banks. They control and distribute reproduction when they want more. They can control the circulation of borrowing money and distribute it according to their choice. They can prohibit you in creating your bank account when they allow according to their wish Even though it’s your own money and they could alter it and you indeed couldn’t argue contrary to it. There was lack of trust, it’s also difficult to prove that it’s your money, its situation like gave them and pray for your money. Even though they also limit on to withdraw your money when you have need of money to run own business. For example, if you have a pintsize magical tree profession that may be for pharmaceutical purposes.

They can convey and confine you not to deposit your business earnings to your bank account which seriously limits you. It means you are unable to make any transaction for personal or business purpose or even use them to save it safe. Furthermore, old-style finance is pretty costly, payday advances drive up to five hundred credit cards can average twenty-five and also the personal advances or you may say loan can charge you eighteen of your value. It all are very much costly rates but unfortunately you pay these high rate without your wish if you want to get it.

The second option is decentralized finance as the alternative of central finance where you good bye to the banks, as an alternative, there are pieces of code that work and perform as a bank. They’re open to anyone and don’t require you to trust them because they’re a piece of code running a program. If you wanted to you could read through it and verify that it’s not going to scam you. They are also censorship-resistant and in the end, they are greatly inexpensive than old-fashioned centralized finance.

Cryptography and Blockchain technology are important components of decentralized finance (DeFi) along with Smart Contracts also. If you are unaware about these three components, then it’s important you must to learn them.

advantages of defi

Five main pillars of decentralized finance

  • Stable Coins
  • Borrowing and Lending
  • Decentralized Exchanges
  • Insurance
  • Margin Trading
defi
The DeFi

It’s actually wide-ranging and developing topic anyways assuming you understand cryptography, blockchain and how smart contracts work but in this post I only introduce the concept of DeFi. In the later articles, we describe the details of DeFi and its pillars.

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