Decentralized Finance (DeFi)

Reading Time: < 1 minute

DeFi refers to a network of decentralized financial apps built on top of blockchain networks.

The development of various DeFi applications was initiated by the discovery of the Ethereum blockchain with its smart contract technology. Smart contracts are a term for computer programs written on top of the Ethereum blockchain, which give developers the freedom to experiment with their own code and create applications known as Decentralized Applications (DApps).

DeFi is DApps focused on making traditional financial services decentralized. Some examples of DeFi include decentralized exchange applications (DEXs) such as Uniswap and Sushiswap, lending applications such as Compound and Aave, and asset management applications such as Yearn Finance.

If in traditional financial systems financial services rely on institutions such as banks to act as intermediaries, with DeFi, the intermediary function is performed by code written on smart contracts. With DeFi, the cost of using financial services is significantly reduced and ultimately opens the door for all levels of society to take advantage of financial services.

Read also: What is Decentralized Finance (DeFi)?

Explore Other Vocabulary ‚Üí