Decentralized Finance (DeFi)
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Published on September 4, 2025
What is Decentralized Finance (DeFi)?
Decentralized finance (DeFi) refers to financial applications built on blockchain technology. Unlike traditional finance, DeFi applications are not controlled by central authorities like banks or governments. This allows for peer-to-peer transactions without intermediaries, potentially reducing fees and increasing transparency. Examples of DeFi applications include decentralized exchanges (DEXs), lending platforms, and stablecoins.
Q&A
What are the benefits of DeFi?
DeFi offers several potential benefits, including reduced transaction fees, increased transparency due to the public nature of blockchain, and greater accessibility to financial services for individuals in underserved communities. The lack of central control also makes it more resistant to censorship and single points of failure.
What are the risks associated with DeFi?
DeFi is still a relatively new and evolving field. Smart contract vulnerabilities, the volatility of cryptocurrencies, and regulatory uncertainty are significant risks. The lack of consumer protection typical in traditional finance also means users need to be extra cautious.
How does DeFi work?
DeFi applications leverage blockchain technology to create decentralized systems. Smart contracts automate processes, and cryptocurrencies are used for transactions. This eliminates the need for intermediaries like banks, enabling peer-to-peer financial interactions.
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