Defi Explained

Decentralized finance or DeFi refers to financial services built on blockchain technology without any central intermediaries. DeFi uses smart contracts on blockchains like Ethereum to offer traditional financial instruments like lending, borrowing, trading, and yield farming. The rise of DeFi aims to democratize the financial system by removing barriers to access and offering higher interest rates for investors. However, DeFi still faces challenges like security issues, data feed centralization, and volatility. To overcome these challenges and improve its perception, DeFi needs to increase accountability, reduce volatility through stablecoins and ETFs, and gain the trust of more users. If DeFi can address these issues, it has the potential to transform businesses by providing a permissionless financial system with lower costs and more transparency. DeFi represents a new paradigm for finance that could reshape the future of the industry.