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DeFi: You can find all you need to know here

BitForex Editor
Aug 24, 2020

The word "DeFi" seems to be in almost every discussion these days but not many are well-informed to what it means and how it actually works. In this article, you will not just get acquainted with the subject "DeFi" but you will be confident enough to take action and even invite others to do the same.

What is DeFi?

In simple terms, Defi is an abbreviation for decentralized finance. That is pretty much what many know about DeFi but there is still a lot to know. But sometimes, the abbreviated form is expanded to mean, decentralized finance system. This system is built under a blockchain, primarily Ethereum, that allows for the existence of protocols, digital assets, smart contracts and related decentralized apps(DApps)

To explain further, you can picture DeFi to be a financial system that is open and flexible which allows for financial services such as borrowing, buying, selling to be done using apps or contracts under a blockchain With DeFi, the traditional way of banking and performing other financial related services is now easier and much more profitable. According to Alex Pack, this system is aimed at doing an absolute reconstruction in the banking system and it is steadily at it.

DeFi has surely come to stay and there are so many financial services that can be done under this system. These services are done with the help of the smart contracts, dapps and other protocols configured into the system. These signed-in authorities are operated under the etheruem blockchain network and are moving this system faster daily. As at the writing date of this article, about $6B is being locked up inside this system and it isn't stopping there. Now the next question on your mind will be what forms of financial services can be done in this system.

Financial services

1) Lending and borrowing

The same way conventional banks permit borrowing and lending of money, so also does this system. There are DApps that have been constructed for these purposes. Apps like compound, dharma, dYdX allow you to trade your digital asset either by lending it out with a particular interest in return or by borrowing. The most used lending decentralized app is the MakerDAO. This app is a great option in obtaining a stable coin by just keeping your Etheruem fixed for a long time. This stable coin is also referred to as Dai and it is a very effective stable coin many are banking on for lending services.  

2) Buying and selling of cryptocurrency

The way the world is revolving, the digital currency will definitely be taking over the market totally and this is happening sooner than many can actually see. So, DeFi allows for an exchange of cryptocurrencies. You get to use awesome decentralized exchange apps like uniswap, kyber, airswap to mention a few for those transactions.

3) Creating synthetic assets

The same way it is possible for any bank to keep gold and other valuables that are not monetary as collateral is just another financial service that DeFi can perform. The simple way this is done is by using your cryptocurrency as an asset for purchasing or mortgaging anything. One great smart contract platform that is recommendable is abra. With this, it becomes easy to exchange and create synthetic assets.

4) Corporate savings, great results

There are also smart contracts that allow you to do regular savings in a different way. This works in a way that you get to take home your savings or even more if the interests of others tilt to your side. This DApp works like a game and it is called a pool together. With this great game in place, your savings won't be just the savings after a while.

Now, what mega offers of DeFi it different from the traditional banks?

DeFi is gaining so many grounds and it is based on the offer that it stands to provide to help the financial market. Unlike the regular banks that are controlled by a central authority, DeFi gives the role to the owner of the asset. Cool right? It is even more cooler when you read these other splendid offers.

1.  Global access

Aside the fact that your assets get to be monitored by you and you get to be the boss over it, location will not be a limitation to accessing it. The way DeFi system is designed, it will give you at any time in any place access to your funds with the special code that is unique to you. More interesting, all you will just be needing to be in charge of your asset is just a smartphone with internet connection and you are good to go.

2.  Flexibility at its peak

The traditional banking system is known to be rigid and one direction most times but with features under DeFi, this will not be a problem. You get to generate more assets by developing a smart contract or any other dapp and this is not so difficult to do.

3. Complete authority over your investment.

No doubt, the conventional way of banking have configured the financial system to have major say over your assets build-up, but with, DeFi that system is totally demolished. Also, DeFi allows you get to take both the returns and any risks attached.

4. Easy to be a participant

You don't need the permission of any central body to be a member of any contracts or to develop a dApp( decentralized application). You just need to know how it works, read through the terms and be in the system.

5. Passive earning

With all the smart contracts and decentralized apps that DeFi has given voice to, you just need to invest and earn even as you sleep. This system is super great as it keeps running non-stop since the system is built to last with an irreversible coding.

What is the ultimate aim of DeFi?

The aim of DeFi is simple and it is just to see a financial system that is controlled by the owner of the assets and not a central body. Many are seeing the opportunity and diving in quickly even though they are risks. And the truth is, this financial aim of DeFi is fast becoming a reality as these smart contracts are pulling DeFi to the target that it is currently towing.


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BitForex is an exchange service platform that can be classified as one of the Top 10 cryptocurrency exchange services. It is focused on providing millions of users with a digital currency trading and investment tool that is not only safe but also professional and convenient. BitForex has a high customer-oriented culture and state-of-the-art financial technology.

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