ZChains

We discussed what <a href="https://coinmarketcap.com/community/articles/66cc95d3a60ff7725d1e4ad8/" rel="noopener noreferrer nofollow">RWA Tokenization</a> is in the previous article. This series continues to explain what DeFi is and how it propels the blockchain industry.Imagine banking without banks. Financing without financial institutions. That’s the overall gist of Decentralized Finance, or commonly known as DeFi. Decentralization is the key concept in DeFi. In the broad financial field, Decentralization promotes the idea of removing the centralized authority or middlemen such as a bank. This is made possible with the utilization of blockchain technology. When everything, such as the transactions are recorded and made into the blockchain, they are near impossible to be tampered with.DeFi is shaking up traditional finance by letting people manage, lend, and borrow funds directly on the blockchain. The smart contracts run on blockchain automate everything from lending to trading. These digital agreements self-execute based on coded terms, meaning transactions happen without middlemen.<h2 id="header-0">DeFi’s Building Blocks</h2>DeFi is a vast space, with each component focusing on a specific financial service.Lending and Borrowing: Protocols like Aave and Compound have set up lending pools that let users earn interest by lending their crypto or borrow against their holdings. It’s direct, cutting out the need for a bank, and often more rewarding for both lenders and borrowers.Decentralized Exchange (DEX): Instead of a typical exchange, DeFi offers decentralized trading platforms like Uniswap, where users trade with each other directly via liquidity pools. It’s a new model of exchange that’s run by smart contracts instead of a central authority, so people can trade their assets more freely.Stablecoins: DeFi relies on stablecoins—digital currencies tied to real-world assets like the USD or gold—offering a stable base for transactions and loans. Coins like DAI help reduce crypto’s volatility, providing a steady value within DeFi transactions.<h2 id="header-1">Why DeFi Is Making Waves</h2>DeFi’s rise can be boiled down to a few unique benefits.Access for All: DeFi aims to democratize finance, making it available to everyone with an internet connection. No bank account? No problem. DeFi apps allow anyone to access services, making it an option for the unbanked or underserved globally.Transparency and Security: Blockchain transactions are public and can be verified by anyone, offering a high level of transparency. It’s a major advantage over traditional finance, where a lot of information is private and can be manipulated.Control Over Assets: DeFi lets users keep control of their own money. With self-custody wallets, you don’t have to rely on a bank or a third party to hold your assets, giving you full control and ownership.<h2 id="header-2">Explosive Growth of DeFi</h2>DeFi has expanded at breakneck speed. In just a few years, the value locked in DeFi platforms surged into the billions, as people realized the potential of decentralized financial services. Popular platforms like Uniswap, Aave, and Curve Finance have been widely adopted, and DeFi is one of the fastest-growing areas within crypto.Lately, DeFi has even started exploring Real-World Assets (RWA) by bringing physical assets like real estate or stocks onto the blockchain, allowing users to trade, lend, or borrow using assets backed by real-world value.<h2 id="header-3">Looking Ahead</h2>DeFi’s potential is huge, and it’s already projected to be a multi-trillion-dollar market in the near future. Innovations keep coming, including further integration of real-world assets, making DeFi even more accessible and useful for a wider audience.With its focus on financial freedom and control, DeFi is gradually reshaping how we think about finance—putting people, rather than institutions, in control of their money. As DeFi grows and evolves, it may redefine financial systems entirely, making them more open, transparent, and user-centric than ever.

Decentralized Finance (DeFi), What Is It?

Table of Contents

ZChains

Other articles published on Nov 8, 2024

Bitcoin MENA Conference 2024: Eric Trump to Speak in Abu Dhabi, Highlighting the UAE’s Growing Ro...

Coinbase Introduces Bitcoin Token on Solana

Monday Recap: Coinbase Fee Controversies, Hamster Kombat’s Decline, and a $200K Bitcoin Prediction

What Is the Best Crypto Presale To Buy Right Now?

Best Cryptos to Invest In: The Coins Ready to Soar This Year!

Binance Co-Founder Yi He Denies Claims of High Listing Fees on the Exchange

Join our free newsletter for daily crypto updates!