DeFi will bring a global revolution to the traditional finance space. Decentralized finance came to life with the inception of Ethereum in 2013. However, it truly hit the ground running in 2016–2017 with the backing of Ethereum developers and some entrepreneurs and experts in the financial investment sphere. To get our facts right and clear all misconceptions, DeFi encapsulates a variety of financial applications in cryptocurrency or blockchain that is geared toward removing intermediaries between parties in financial transactions.
A large majority of DeFi applications are built on top of Ethereum. The first major and the largest, DeFi application is MakerDAO, which was founded by Rune Christensen. Ethereum, to put it briefly, is an open-source platform that uses blockchain technology to create and run decentralized digital applications.
The development of DeFi in subsequent years
As an exciting new concept, DeFi is the rapidly expanding ecosystem of blockchain-based financial products that look to replicate or expand on the capabilities of traditional finance institutions — like banks, payment processors, clearinghouses and more. DeFi is portrayed to be a solution to the problems faced by traditional banking and financial institutions and shows how it may eventually replace the old system, in real-time. Regardless of the technology or platform used, DeFi systems are designed to do away with intermediaries between transacting parties.
The volume of trading tokens and money locked in smart contracts in its ecosystem has been growing exponentially, proving that this concept is here to stay. As per DeBank, there is approximately $60.5 billion in net value currently locked in DeFi.
DeFi provides an accessible approach to manage financial transactions. As the name suggests, government jurisdictions and changes by centralized financial institutions do not apply to it. This eliminates the dependency on third parties, giving users complete control over their transactions and at the same time allowing them to remain anonymous since all transactions are carried out over smart contracts on the blockchain. Transactions and trading of cryptocurrencies can be executed from any location since it provides financial inclusivity.
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