what is defi crypto

Defi (sometimes referred to as DeFi or decentralized finance) is a movement of developers, entrepreneurs, and investors that are dedicated to building and expanding the infrastructure for open financial services. Defi is a buzzword used to describe the emergence of blockchain-based financial services that are accessible to anyone with an internet connection, an Ethereum wallet, and compatible cryptocurrency. These services are meant to provide both users and developers with the same basic financial services as those offered by traditional financial institutions, all while removing the need for the institution itself.

At its most basic, Defi is a set of protocols and financial instruments that allow users to interact with and execute financial transactions without going through an intermediary. By leveraging the Ethereum blockchain, open-source code, and decentralized digital currencies such as Bitcoin, the movement seeks to facilitate trustless, censorship-resistant, and transparent economic transactions. Defi-based services are powered by DeFi protocols, which are software libraries that provide access to the blockchain, digital currencies, and open-source code.

These protocols typically give developers access to the Ethereum Distributed Protocol (EDP), which permits token transfers, asset management, and use of decentralized applications. This grants developers access to a global network of smart contracts and applications. DeFi allows developers to create financial products and services that are accessible to anyone, regardless of whether or not they have access to traditional financial services.

The three main applications in the Defi ecosystem are decentralized exchanges, interest-earning platforms, and decentralized prediction markets. Decentralized exchanges, or DEXs, are essentially peer-to-peer trading platforms that enable users to trade cryptocurrencies without the need for intermediaries. Interest-earning platforms enable users to lend and borrow assets which implicitly allows them to earn interest on digital assets without traditional intermediaries like brokers or banks. Decentralized prediction markets are platforms that allow users to bet on the outcome of various events and make a profit when their forecast is correct.

Defi seeks to create an open financial system where anyone can have access to the financial services they need without the need for central intermediaries. The movement is currently in a period of rapid growth and has the potential to disrupt traditional financial intermediaries if the technology matures. The potential for Defi is only growing as the ecosystem evolves, giving developers access to an ever-growing variety of tools with which to build out the open financial system.