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Decentralized Finance (DeFi) is Changing the New Shape of Finance
What is DeFi?
Decentralized Finance (DeFi), built on blockchain technology, is fundamentally changing the way financial services are provided as cryptocurrencies evolve. It aims to create an accessible and highly transparent financial ecosystem by utilizing smart contracts and cryptocurrencies, eliminating reliance on traditional centralized intermediaries such as banks and securities firms.
Key Differences from Traditional Finance
The biggest feature of DeFi is its “open and permissionless” nature, removing the need for cumbersome approval processes like opening a bank account. Anyone with an internet connection can participate from anywhere in the world. Since transactions occur directly on the blockchain, costs associated with intermediaries are reduced, and transparency is enhanced.
Diverse Financial Services
DeFi is not just a platform for transactions. It encompasses a wide range of financial activities, including lending and borrowing protocols, decentralized exchanges (DEX) for free asset swapping, and yield farming for earning rewards through liquidity provision. These services operate 24/7, providing users with the flexibility to manage their financial activities at their own pace.
Potential of Decentralized Technologies
Decentralized finance based on cryptocurrencies promotes financial inclusion and improves capital efficiency. Even those excluded from traditional financial systems can access opportunities for asset building through DeFi. With transparency and automated execution mechanisms, a new financial infrastructure that does not require trust is being built.