What is DeFi?

In the tenth video commissioned by the Helsinki Blockchain Center, Keir Finlow-Bates tackles the question “What is DeFi?”.

Definition and Context:

• DeFi: Stands for “Decentralized Finance”.
• Goal: Mimics traditional financial activities (lending, trading, etc.) without the need for central authorities like banks.
• Complexity: Traditional finance is a vast and complex system, with DeFi not yet replicating all its activities.

Examples of DeFi Projects:

• Decentralized Exchanges (DEXs): Uniswap and Sushiswap allow direct trading of cryptocurrencies without intermediaries.
• Lending and Borrowing Protocols: Aave and Compound enable users to deposit their cryptocurrencies to earn interest or borrow assets.

Basic Operation:

• Smart contracts: Automate the execution of financial agreements on the blockchain.
• Cryptocurrencies as a foundation: DeFi activities are based on cryptocurrencies like Bitcoin and Ether that have real value.

Advantages of DeFi:

• Decentralization: Removes the need for intermediaries, increasing transparency and accessibility.
• Efficiency: Reduces costs and speeds up transactions.
• Security: Protects users from fraud and manipulation.

Conclusion:

DeFi represents a promising innovation in the financial world, offering decentralized and automated alternatives to traditional financial activities.