Strona G艂贸wna
Decentralized Finance (DeFi)

Decentralized Finance (DeFi)

DeFi stands for 鈥渄ecentralized finance鈥 and refers to the ecosystem comprised of financial applications that are being developed on top of聽blockchain systems.聽
DeFi may be defined as the movement that promotes the use of decentralized networks and open source software to create multiple types of financial services and products. The idea is to develop and operate financial聽DApps on top of a transparent and trustless framework, such as permissionless blockchains and other peer-to-peer (P2P) protocols.

Currently, the three largest functions of DeFi are:

  • Creating monetary banking services (e.g., issuance of聽stablecoins)
  • Providing peer-to-peer or pooled lending and borrowing platforms

  • Enabling advanced financial instruments such as DEX, tokenization platforms, derivatives and predictions markets

Within those three fields, there are several types of DeFi services. A few other examples of products and use cases include funding protocols, software development tools,聽index construction, subscription payment protocols, and data analysis applications. DeFi dApps may also be used for聽KYC,聽AML, and other identity management services.
Decentralized finance brings numerous benefits when compared to traditional financial services. Through the use of聽smart contracts and distributed systems, deploying a financial application or product becomes much less complex and secure. For instance, many dApps are being developed on top of the聽Ethereum blockchain, which provides reduced operational costs and lower entry barriers.

Summing up, the DeFi movement is shifting traditional financial products to the open source and decentralized world, which removes the need for intermediaries, reduces overall costs, and greatly improves security.