What is DeFi?

DeFi is one of the most popular trends in the current crypto world. Why? Read below to discover all you need to know.

What does the word “DeFi” mean?

DeFi is a word that includes all those decentralized financial systems such as decentralized exchange, insurance companies, money markets, and so on. Its aim is to create autonomous realities in which anyone can participate. There is no central authority, no middleman. This allows the creation of several decentralized services.

What do you need to create a DeFi system?

If you want to create a decentralized financial system, you need an infrastructure that is able to program and run its services. Right? Well, one of the most popular platforms to do so is Ethereum, which allows you to write decentralized programs, also known as Dapps. On that platform you can write automated code, called smart contracts, whose job is to manage the financial services according to the rules you determine. Remember that, once you write the rules, you will no longer have control over them, as they are immutable.

Find a stable currency

Once you have your financial infrastructure, you need a currency to operate in it. Beware that not all currencies are compatible with a certain platform. And if you choose Ether or Bitcoin, you have to keep in mind they are quite volatile currencies. You may prefer finding a stablecoin. These currencies are pegged to the value of a fiat currency, like Euros or the US dollar. They are decentralized, trustless and cannot be shut down. A famous stablecoin is DAI.

In the future

It must be said that DeFi is a young industry that is still developing, and has plenty of miles to make before reaching its full potential. That means that regulation of DeFi is minimal. However, decentralized finance is set to replace modern finance in the future.

To sum up, DeFi systems are primarily designed to remove any kind of intermediary between the parties that make transactions. As with traditional financial systems, DeFi components require stable currencies in order to work.

Learn more about defi on www.wewe.global/ecosystem