what is defi? how does it Defers from crypto?
Introduction
What is DeFi and how does it relate to cryptocurrency? Let’s start with the basics: DeFi stands for “decentralized finance” and refers to a new way of using blockchain technology in peer-to-peer networks that doesn’t require centralized institutions or middlemen. In other words, it’s a way of performing financial tasks without any banks as intermediaries. That might sound like an oversimplification, but it’s actually pretty accurate! Still not sure what I mean by this? Well then read on dear reader because here comes the fun part – we’re going to dive into cryptocurrency (like Bitcoin) vs. DeFi (Decentralized Finance) and everything they have in common but also how they differ so you can make informed decisions about which one is right for you!
DEFInition
Defi is a decentralized financial system that aims to provide users with more freedom and control over their money.
Unlike standard fiat currencies, which are controlled by central banks and subject to inflationary policies, Defi uses decentralized blockchain technology to ensure that it remains stable throughout its lifespan.
What is DeFi?
The term “DeFi” is short for “decentralized finance.”
It refers to the growing number of products and platforms that are emerging to serve the needs of financial systems without central actors, like banks or governments. The first wave of DeFi products were built on top of blockchains like Ethereum, but today many other layers have emerged to enable new forms of finance — including stablecoins, liquidity providers and peer-to-peer lending networks.
It’s decentralized!
DeFi is a decentralized network of financial applications that use blockchain technology to create new financial services. This means that it operates without any central authority or institution controlling it. Instead, it’s a peer-to-peer network where anyone can participate as a node on the network and contribute to its upkeep and security.
It runs on blockchain technology
The Defi token is an ERC20 token, which means it runs on blockchain technology. Blockchain is a distributed ledger technology (DLT). This means that unlike traditional centralized systems that run on one server, the Defi network uses a decentralized system of interconnected blocks. These blocks store transactions and data in such a way that no single entity can control the information stored within them.
The four key components of this technology are:
- Decentralization – Data isn’t stored or controlled by any one entity; rather, it’s spread across various servers around the world. This makes it nearly impossible to hack or alter data because no single person has access to all of it at once.
- Open Source – Anyone can use this software freely as long as they follow certain rules laid out by its creators (in this case, Defi Ventures). By being open source, we know exactly what kind of code we’re running—and anyone who wishes may audit our code for bugs and security flaws before using our platform!
What can you do with it?
You can use Defi to:
- Trade, borrow, and lend. You can trade your crypto for other cryptocurrencies and fiat money (USD). You can also lend money to other users in exchange for interest on their loans.
- Earn interest on your crypto holdings. This is especially useful if you’re waiting to sell a coin that has been fluctuating in value—you could earn a bit of cash while waiting for the price to go up again!
Conclusion
As you can see, there are many ways that cryptocurrency and DeFi are different. However, they both share the same underlying technology and aim to bring financial services back into the hands of the people who need them most.