DeFi stands for “decentralized finance” and refers to a financial system built on top of blockchain technology that operates in a decentralized and open manner. In DeFi, financial transactions such as lending, borrowing, trading, and investing are conducted through decentralized applications (dApps) that run on a blockchain network, with limited needs for intermediaries like banks or other financial institutions.
DeFi applications use smart contracts, which are self-executing contracts with the terms of the agreement between buyer and seller directly written into code. These smart contracts are stored on a blockchain network, ensuring transparency, immutability, and security. DeFi applications can also use stablecoins, which are cryptocurrencies that are pegged to a stable asset like the US dollar, to provide stability in value.
DeFi has gained popularity in recent years due to its potential to offer financial services to anyone with an internet connection, without the need for a bank account or other traditional financial infrastructure.
Traditional finance players can use DeFi to improve their products.Michael Wutzke, Co Organizer Finance Yard