What Is “Decentralized Finance” (DeFi)?
DeFi is an umbrella term for financial applications built on blockchain technology, aiming to recreate traditional financial systems without intermediaries like banks. It uses smart contracts to offer services such as lending, borrowing, and trading in a decentralized, transparent, and permissionless manner.
Its core value proposition is accessibility and censorship resistance. It is built on open-source protocols.
Glossar
DeFi
Framework ⎊ Decentralized Finance, or DeFi, represents a paradigm shift in financial infrastructure, leveraging blockchain technology to disintermediate traditional intermediaries and foster open, permissionless access to financial services.
Financial Applications
Derivatives ⎊ Within the evolving landscape of cryptocurrency, derivatives represent a crucial layer of financial engineering, extending beyond spot trading to encompass instruments like perpetual futures, options, and structured products.
Intermediaries
Function ⎊ Intermediaries are central entities, such as brokers, exchanges, and clearinghouses, that provide essential services to facilitate the execution, settlement, and custody of financial transactions between transacting parties.
Trading
Execution ⎊ The core of trading within cryptocurrency, options, and derivatives involves the practical implementation of strategies predicated on market analysis and risk assessment.
Accessibility
Barrier ⎊ The concept of accessibility in crypto derivatives addresses the structural and procedural impediments preventing broad market participation.
Smart Contracts
Function ⎊ Smart contracts are self-executing agreements with the terms of the agreement directly written into lines of code, residing on a decentralized ledger.