What is DeFi? The Complete Guide to Decentralized Finance
What is DeFi?
Where does DeFi come from?
How does DeFi work?
The most popular DeFi applications
Lending and borrowing
How do I get started with DeFi?
Pros and cons
- You hold your own money. Instead of putting your money in the hands of financial institutions, you hold it and control how it is used.
- Faster than traditional finance. Deposits and withdrawals from the traditional finance system can take days, whereas in DeFi it is a matter of seconds or minutes.
- Open-source and permissionless. Billions of people around the world are unbanked because of insufficient identification and access to capital, geographic isolation, and government oppression. DeFi is open to anyone with an internet connection and the markets are open 24/7.
- It's built on transparency. Anyone can look at the data and the smart contracts and inspect how it works.
- Keep your privacy. Wallets are pseudo-anonymous, listing only public addresses. There is no need to associate personal identification with a wallet.
- Higher interest rates. DeFi lending protocols typically offer much higher interest rates for deposits not seen in traditional finance.
- Higher fees than centralized exchanges. Many of the DeFi services are also offered by centralized exchanges like Coinbase and Binance, with lower fees, since each transaction doesn't have to be recorded on the Ethereum blockchain.
- High risk of losing funds. In DeFi, it is possible to lose funds to scammers, exploits, and vulnerabilities found in smart contracts, hackers stealing funds from wallets, and many other attacks.
- Lack of insurance. While insurance is used in centralized finance as protection against fraud and other exploits, it's much rarer to find on DeFi.
The bottom line
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