Decentralized Finance is the emerging technology based on the blockchain technology. Unlike centralized financial systems DeFi is independent of any intermediaries

DeFi is one of the derivative of blockchain technology. It enable finance in Decentralized manner which is Blockchain’s property. This is more like a banking system with the facility of lending money, holding and streaming money with automation applied by smart contracts running on the blockchain.

How DeFi works?

Defi is an ecosystem where different Daaps (Decentralized apps) based on public blockchain like etherium process financial transactions as like banks.

Advantages of DeFi

• Transparency: Decentralized Finance is open to all its members, everyone on the network can view the whole transactions.
• No intermediary: There are no intermediary and no brokerage in Decentralized Finance.
• Open to all: Anyone with the internet connection and a crypto wallet can access to this financial system.
• Fast: As there is no intermediary transaction speed is considerably fast.
• Programmable: Smart contracts are the basis of Defi, which enable development of new mechanisms.

Disadvantages of Defi

• Volatility : As money involved in DeFi is cryptocurrency which is highly volatile in nature in terms of value.
• Complexity : DeFi is an evolving tech and more complex to understand as compared to centralized finance.

What you can do with DeFi

• Lending: You can lend money and earn iterest on it.
• Borrowing: you can borrow cryptocurrency and digital assets on Decentralized finance.
• Flash Loan: This is relatively a new concept in the finance, here loan disbursement and repayment all occurs in the same transactions.

Future

DeFi with its constantly growing ecosystem is still in its early phase. Investing in DeFi projects is full of risks and require special understanding of it.

Many central agencies are trying to formulate a common protocol for monitoring and governing DeFi across nations jointly.