What is DeFi ?

 DeFi is short for “decentralized finance,” an umbrella term for a variety of financial applications in cryptocurrency or blockchain geared toward disrupting financial intermediaries.


What Is a Decentralized Application?

It is that application through which transactions are made with the middle men removed from the picture.

For instance, when you pay with a credit card for coffee at a cafe, a financial institution sits between you and the business, with control over the transaction, retaining the authority to stop or pause it and record it in its private ledger. With cryptocurrency, those institutions are cut out of the picture. All middle men are removed from the transaction, Cutting out middlemen from all kinds of transactions is one of the primary advantages of decentralized finance.

Most decentralized finance applications are built on top of Ethereum, the world’s second-largest cryptocurrency platform, which sets itself apart from the Bitcoin platform in that it’s easier to use to build other types of decentralized applications beyond simple transactions.

The most popular types of DeFi applications include:

Decentralized exchanges (DEXs): Online exchanges help users exchange currencies for other currencies, whether U.S. dollars for bitcoin or ether for DAI. DEXs are a hot type of exchange, which connects users directly so they can trade cryptocurrencies with one another without trusting an intermediary with their money. Examples are Uniswap, Kryptolite swap, MakerDAO etc

Stablecoins: A cryptocurrency that's tied to an asset outside of cryptocurrency (the dollar or euro, for example) to stabilize the price.

Lending platforms: These platforms use smart contracts to replace intermediaries such as banks that manage lending in the middle.

"Wrapped" bitcoins (WBTC): A way of sending bitcoin to the Ethereum network so the bitcoin can be used directly in Ethereum's DeFi system. WBTCs allow users to earn interest on the bitcoin they lend out via the decentralized lending platforms described above.

Prediction markets: Markets for betting on the outcome of future events, such as elections. The goal of DeFi versions of prediction markets is to offer the same functionality but without intermediaries.

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