Decentralized Finance, also known as DeFi, uses cryptocurrency and blockchain technology to manage financial transactions. DeFi aims to democratize finance by replacing traditional centralized institutions with peer-to-peer relationships that can provide a full range of financial services, from day-to-day banking, loans and mortgages to complex contractual relationships and negotiation of contracts. active.
Centralized finance today
Today, almost all aspects of banking, lending and commerce are managed by centralized systems, operated by governing bodies and gatekeepers. Regular consumers have to deal with a host of financial intermediaries to gain access to everything from auto loans and mortgages to trading in stocks and bonds.
In the United States, regulators like the Federal Reserve and the Securities and Exchange Commission (SEC) set the rules for the world of centralized financial institutions and brokerage houses, and Congress changes the rules over time.
As a result, there are few avenues for consumers to directly access capital and financial services. They cannot bypass middlemen like banks, stock exchanges and lenders, who earn a percentage of every financial and banking transaction as profit. We all have to pay to play.
The new path: decentralized finance
DeFi challenges this centralized financial system by relieving intermediaries and custodians of responsibility, and empowering ordinary people through peer-to-peer exchanges.