Can you explain the concept of decentralized finance (DeFi)?

[XKUBI]

Certainly! Decentralized Finance, commonly known as DeFi, refers to a set of financial services and applications built on blockchain technology, primarily on platforms like Ethereum. The key characteristic of DeFi is that it aims to recreate traditional financial systems (such as banking, lending, and trading) without relying on centralized authorities like banks or financial institutions.

Here are some fundamental aspects of decentralized finance:

1. Decentralization: DeFi systems operate on blockchain networks, which are distributed and decentralized. This means that there is no central authority controlling the entire system. Instead, transactions and operations are recorded on a public ledger that is maintained by a network of computers (nodes).
2. Smart Contracts: Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They automate and enforce the rules of a financial agreement without the need for intermediaries. Ethereum, the leading blockchain for DeFi, is particularly popular for its ability to support complex smart contracts.

 

[Suba]

Your explanation is quite good but not complete, therefore I will only add or complement it to get a deeper understanding of the fundamental aspects of DeFi such as: smart contracts, yield farming and DeFi protocols.