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The Rise And Rise Of Defi
You must have heard about DeFi.
However, what is DeFi? And what does the term even mean? Even if you are not sure what it means exactly, you can most likely link it to cryptocurrencies.
DeFi (Decentralized Finance) represents a new approach in the cryptosphere. It has its goals set on what traditional finance has already achieved: access to high-quality financial services for everyone. However, what is best about DeFi is that it is powered by blockchain technology which means transparency and security of data. Most importantly, unlike traditional banking system where users don't even have control over their funds without intermediaries, with DEFI users are the sole owners of their money. Pretty similar to what cryptocurrencies stand for!
Therefore, what makes defi what it is?
There are three basic principles for what makes defi what it is: disintermediation, transparency and user-ownership.
"Disintermediation" means cutting out the middleman institution such as governments or banks. DeFi platforms allow users to control their own funds while offering them a variety of services previously ...
... limited to traditional finance (such as lending and borrowing).
"Transparency" ensures that all transactions on these platforms can be viewed by anyone in real time. These public ledgers provide unrivaled accountability and security.
"User-ownership" simply means no third party has ultimate ownership over your funds and thus can prevent you from sending money at any time, or use your funds in ways you don't agree with.
Another factor what makes defi what it is is a development of a completely new infrastructure from scratch. Existing financial infrastructure is not designed to handle global transactions between strangers because all parties rely on the intermediary's credibility and transparency. In other words, before defi platforms came around no one had ever attempted to determine whether sending money directly from one person to another was possible without a trusted third party involved. And that's what made the creation of these platforms so important!
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