DeFi is a term used to represent a form of decentralized finance developed on the blockchain technology platform. Accordingly, DeFi allows users to have full access and control over their assets, eliminating control from any other third party.
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What is DeFi?
DeFi is the acronym for Decentralized Finance, a term used to refer to a form of decentralized finance developed on the infrastructure of the blockchain technology platform. Thanks to this decentralization, users have full access and control over their assets.
In other words, all assets that users own in DeFi will not be subject to the control and management of centralized authorities. This is extremely important to achieving a future with a fully open platform.
Besides, if you have time, we would like to suggest you check out other interesting content such as What is GameFi, What is DApp, Retik Finance,…
What is the nature of DeFi?
The nature of DeFi is based on the blockchain technology platform itself, so it receives all the properties and benefits from this technology such as:
- Decentralized: DeFi is not controlled or interfered with by intermediaries but is passed through programming code in smart contracts.
- Distributed: Transaction data in DeFi is authenticated and stored on the systems of nodes globally.
- Transparency: All transaction data and source code in DeFi are public, allowing anyone to access and inspect.
- No licensing required: Users can create their own DeFi applications or participate in using existing services without needing permission from intermediaries.
- Anonymity: The only information users need to share in DeFi is the public wallet address. There is no need to share other personal information if not necessary.
- Self-governance: Users control their assets and cryptocurrency wallets through encrypted private keys.
What are DeFi products?
Some particularly popular products in DeFi include:
- Stablecoin: A cryptocurrency that is tied to the value of a real asset such as USD, EUR,… to keep the price at a stable level.
- DEX Exchanges: Trading platforms without intermediaries, allowing users to exchange peer-to-peer without the need to deposit assets.
- Lending and Borrowing: DeFi provides lending and borrowing services that do not require identity verification, just fully secured by collateral.
- NFT: These are non-fungible tokens, often used to represent items such as art, music, games,…
What are the advantages and limitations of DeFi?
Advantage
- Providing opportunities for everyone to access financial services in DeFi.
- Transparent and open, anyone can track and verify transactions.
- Completely decentralized, and not controlled by any intermediaries.
- Smart contracts on DeFi platforms can be programmed and customized according to different needs.
- Brings many opportunities and potential for development.
Limitations
- Not yet accepted and protected by many countries.
- The ecosystem is very diverse but less compatible with each other.
- Not designed to handle large-scale reception.
- Not fully utilized and developed for user experience.
How is DeFi different from Bitcoin?
If we ask how DeFi is different from Bitcoin, there will only be two things we can mention:
- Concept: DeFi is a form of decentralized finance while Bitcoin is a cryptocurrency. If understood that way, DeFi is an environment that can be used to exchange and trade Bitcoin or other cryptocurrencies. similar.
- Use cases: With DeFi being used as an environment that allows transactions to be made as well as loan requests, Bitcoin is used as an object of exchange or used to store investments as an object. valuable product.
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Conclusion
Here is all the content we can share about DeFi. Hope this information will be useful to you. If you have any other questions, don’t hesitate to contact AZcoin.
DeFi is an important part of Web3, you can read more: Web 3.0 Explained: Why is it important?
I am Tony Vu, living in California, USA. I am currently the co-founder of AZCoin company, with many years of experience in the cryptocurrency market, I hope to bring you useful information and knowledge about virtual currency investment.
Email: [email protected]
