What is DeFi?

DeFi is an acronym for “decentralized finance.” This term refers to blockchain-based applications that process the types of financial transactions that have always been carried out by banks and brokerage firms. By eliminating the middleman, DeFi crypto applications potentially offer users more control, greater flexibility, faster transactions, and lower costs. There are benefits, like the ones that led financial analyst Steve Fernandez to headline a recent article published on Banyan Hill, “DeFi Will Kill the Banking Industry.” DeFi is a new term and is not universally understood in the same way. “What is DeFi?” Different people may give different answers to the question. When it comes to crypto, its meaning changes frequently. In the broadest sense, almost every smart contract running on a blockchain is a DeFi application. But most DeFi applications handle tasks like lending, investing in crypto and derivatives, asset management, and insurance

Advantages of DeFi

-You don't need a brokerage account or credit history to use DeFi apps. You do not need your government-issued ID. DeFi applications are publicly available via blockchain for anyone to use, without the barriers that exist at banks and investment firms. Its universal availability means DeFi applications can bring the benefits of financial services to people who lack access to banking services (more than 1.7 billion people in emerging economies, according to a 2021 study by the World Bank's Global Partnership for Financial Inclusion initiative). In a traditional bank, some transactions take days or even weeks to complete. With DeFi, transactions are completed within minutes.

Traditional banks and brokerage firms keep your money in accounts. They use your money as collateral or lend it to others and pocket the interest. With DeFi you keep your own funds. In the traditional investing world, you must rely on the judgment of investment advisors and financial managers to manage your investments. With DeFi, you make the decisions about how your money is spent. Banks only operate between certain hours, but the blockchain is always open for transactions. Any type of cryptocurrency can participate in DeFi applications if it can implement smart contracts. Bitcoin is not a good platform for DeFi, but Wrapped Bitcoin token, which runs on the Ethereum blockchain , is an important one among DeFi tokens.

Disadvantages of DeFis

-In DeFi systems, users may have difficulty reversing and compensating their transactions when they make incorrect transactions. Users in regions without technological infrastructure may encounter obstacles in accessing DeFi systems. There may be fraudulent DeFi projects in the cryptocurrency market. Users may become victims of these fraudulent projects.

In decentralized financial systems, users may not have the opportunity to leave a legacy for future generations.In decentralized financial systems, users may not have personal legal rights.

DeFi Momentum

-Creative entrepreneurs around the world are creating new applications for decentralized financial technology. This is one reason why the total value locked in DeFi contracts has increased from around $1 billion in May 2020 to over $88 billion in May 2021. The market cap of DeFi coins exceeded $140 billion in the same month, and the total value of outstanding DeFi loans was almost $10 billion.

The news describes DeFi as a market that is still in its infancy. That's true… but it's also true that there are hundreds of DeFi dApps and its platform is currently used by millions of people. Some people think DeFi is an application that will spell the end of banks and brokerages. Others see it as a niche technology championed by libertarian dreamers with their heads in the clouds. But there's one thing everyone agrees on: DeFi is the most fascinating and potentially lucrative application of blockchain technology since the launch of Bitcoin. DeFi may be the application category that brings crypto into the mainstream.

What is the Difference Between Centralized Finance and Decentralized Finance?

-Centralized Finance (CeFi) refers to the traditional financial system in which financial transactions are facilitated and supervised by banks and other financial institutions. These institutions act as intermediaries for financial transactions and charge fees for their services. In the centralized financial system, all transactions such as loan applications and the use of local bank services are supervised and regulated by these institutions.
The decentralized financial system is a financial system that works on the blockchain network and does not need intermediaries. DeFi; It allows individuals, traders and businesses to conduct direct financial transactions through emerging technologies.

DeFi Hangi Altyapıya Bağlıdır?

-DeFi services operate on a blockchain-based infrastructure such as Ethereum and Bitcoin. Blockchain is a data structure. This structure consists of a series of interconnected blocks. Thanks to this sequence, that is, the connection, the data between the blocks become interconnected. Data is stored here. So, a blockchain database is a structure that stores data in blocks linked together on a chain. Thus, data is shared safely and efficiently. The main feature of blockchain technology, which you can think of as a data ledger in its simplest form, is that the data is immutable and stored reliably.

Largest Defi Coins and Defi Tokens by Market Cap

-When the list of defi coins and defi tokens is examined, it is seen that certain cryptocurrencies are growing quite fast compared to their market value. The largest defi coins and defi tokens by market cap are:
Uniswap
Sushiswap
Near
Cardano
GHOST

Why Did DeFis Appear?

-With the creation of the Genesis Block in 2009, the concept of decentralized finance began to be discussed for the first time. DeFis emerged to enable financial transactions without being connected to a specific central system. DeFis are not tied to a central element such as a state, company, individual or organization. Each user is responsible for his/her actions. Central authorities cannot create any control mechanism over users.

Conclusion

-Decentralized finance (DeFi) is a new financial paradigm that leverages distributed ledger technologies to deliver services such as lending, investing, or exchanging crypto assets without relying on a traditional central intermediary. DeFi replaces old, centralized institutions with peer-to-peer relationships. It's like self-custody financing - meaning no one can access your money but you. DeFi is a paradigm shift in traditional finance and is changing the financial ecosystem. While DeFi offers many advantages, it also brings challenges such as security, regulatory compliance and scalability. However, as DeFi evolves, it has the potential to revolutionize the financial industry by providing a more transparent, accessible and democratic financial system.