DeFi is a financial framework based on decentralized blockchain protocols.
You see, blockchain provides a platform for the development of systems and tools that can operate without third party interference. These can be cryptocurrencies, tokens, decentralized apps, smart contracts, and so much more.
All those things collectively make up a new financial system that operates without central institutions, in other words Decentralized Finance.
Sounds good, but why do we need it?
In short, because CeFi is susceptible to mismanagement, fraud, and corruption.
DeFi allows individuals to take full control of their finances without relying on banks or other institutions. This means that there is no need to undergo complex procedures to qualify for a service, and there is no authority that can deny access to funds or block transactions.
DeFi is an inclusive system that rises above governmental supervision and geographical borders to offer a transparent and secure financial approach.
Think, for instance, of those that are unbanked or living in war zones and extremely remote areas. Traditional finance cannot or will not service these individuals. The same applies for individuals living in countries that have high inflation rates or that are under sanctions.
On the other hand, DeFi offers everyone access to the same services that CeFi does; all that’s needed is an internet connection.
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