DeFi what is it?

DeFi is Envisioned as Decentralized Finance

DeFi or Decentralized Finance is an area in the Crypto World attracting huge attention these days.

This is an attempt to create another financial system that would take advantage of blockchain technology. They say that even though bitcoin was the first blockchain technology created by Satoshi Nakamoto it is to slow, and couldn’t handle what DeFi can do for finance. 

They say that the advantage of this type of decentralized smart contract is that since it doesn’t reside on a particular companies servers, it essentially cannot be hacked. And we all know how many times financial institutions have been hacked in the past.

So DeFi is being touted as the new way to protect enforceable agreements, a fancy word for contracts.

This DeFi concept is still in its infancy, so I wouldn’t expect to be using it any time too soon.

Blockchain as Digital money

You may only be thinking of tokens like bitcoin as digital money, but it’s a lot more than that.

What was developed to protect these digital coins, namely the blockchain technology is actually a distributive ledger that keeps track of an asset.

The key that makes bitcoin attractive, is the fact that it’s independent of the normal monetary systems. This way it remains secure, because a copy of each transaction is copied to every computer on the bitcoin network.

What this does is it ensures that no two transaction can differ. This works because if there’s a discrepancy between any of the copies on its block chain, the transaction will not go through.

Defi

This area of finance has been in need of improvement for some time now, and this is what DeFi is intended to accomplish. Using the same technology that Crypto currencies use DeFi or decentralised finance can benefit from this system as well.

Many in the financial services business are looking into using these smart contracts, which are automated enforceable agreements that don’t require intermediaries like a bank or lawyer. These smart contracts use online blockchain technology instead.

Essentially what DeFi does is to use blockchain technology to not only create agreements but to also ensure their security. There should be a reduction in the cost of doing business as this technology rolls out.

By now I am sure you are familiar with the concept of a blockchain or the distributive network.

Not just a Blockchain

When anyone thinks about blockchain, they immediately think of bitcoin. That’s because bitcoin runs on a blockchain and is most widely known for it. And because it’s currently also the premier digital asset.

It’s believed that a system using this blockchain technology, could in fact be a more secure way to conduct financial transactions.

Ethereum

Now the Ethereum token was one of the first to create and use these smart contracts.

One of the benefits of this blockchain technology is that it has many different uses. And DeFi or decentralized finance is just one of them. This seems to be the direction that contracts in the future will take.

And by the way, this article is not all-encompassing by no means, since there is so much more to this stuff. So I suggest the reader continue to research this concept before getting involved with it.