What is decentralised finance (DeFi)?

Decentralised finance (DeFi) is an emerging financial sector that makes use of a distributed ledger system to facilitate online cryptographic transactions.

The term, in a broader sense, encapsulates peer-to-peer digital transactions on public blockchains to help users experience a hassle-free trading ecosystem.

Let's explore DeFi in greater detail.

What is decentralised finance (DeFi)?

Decentralised finance incorporates an array of new facilities that eliminate the need for a centralised financial entity like a bank to officiate transactions.

DeFi is a collective term that simply denotes a wide variety of financial services available on public blockchains that users can make use of to conduct cryptocurrency-related transactions.

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DeFi is typically referred to as peer-to-peer technology, which means that transactions are solely between two people and do not require the intervention of centralised intermediaries such as banks to authorise transactions.

With DeFi, users can access a wide variety of financial services that are decentralised in nature, eliminating the need for intermediaries, merchants, and traders to act as middlemen to help carry out financial transactions.

How does DeFi work?

DeFi makes use of blockchains, or distributed ledger systems, to record and verify transactions. These distributed databases are publicly accessible.

Decentralised applications (dApps) on blockchains can be used for different aspects of financial trading, including lending and borrowing and interacting with decentralised exchanges.

What are the benefits of DeFi?

Since all DeFi transactions are peer-to-peer there is no need for any intermediary or centralised third party to overlook or verify transactions.

DeFi also promotes the factor of global accessibility by allowing people to conduct transactions from anywhere in the world with a stable internet connection.

Learn more about popular DeFi cryptocurrencies: Chainlink (LINK), Polygon (MATIC), Quant (QNT), AllianceBlock (ALBT), Qredo Network (QREDO).