What is “Decentralized Finance (DeFi)” ?

“Decentralized Finance” or “DeFi” is a broad term to describe the applications and projects built on a blockchain network. It is a new decentralized financial system, which unnecessarily relies on intermediaries and is able to conduct all transactions as centralized finance (CeFi), such as generating assets, loaning, staking, transferring, etc., via blockchain technology and Smart Contract.

Users can self-manage their assets fully and freely through credible system and blockchain technology instead of third-party intermediaries. Moreover, users can implement various forms of personal contracts via Smart Contract, which automates the execution of an agreement without intermediaries and controllers. The contract cannot be modified after the execution.

DeFi is multi-purpose; it is utilized as a source to find the best price among worldwide exchanges, without brokers involved. Therefore, DeFi is regarded as a free trade zone, where platforms present the best price at a certain time, and purposely provides maximum benefits to the users. Subsequently, it develops a feature in which the users utilize their assets to assist in providing liquidity to decentralized exchanges. The users will receive specific tokens as a reward, which own their actual value in the decentralized exchanges. The tokens can be converted into other currencies, such as fiat currencies via centralized exchanges (CEXs). Nowadays, DeFi is popular and draws a great number of investors into the industry. The liquidity in both cryptocurrency markets and DeFi markets is increasing, leading to better economic contributing factors.