by The Finance Decentralized is a financial mechanism, or rather, a set of applications and services that transform the financial products without resorting to intermediaries , but using blockchain technology and relying on criptovalute, tokens and smart contract. Its official purpose is to offer people a democratic, secure and transparent system that inspires them to trust with respect to traditional finance or, more specifically, that constitutes a valid alternative for them if they have no way of turning to the traditional financial system. . In this sense, Decentralized Finance is an alternative banking system to the traditional one decentralized website.
The objectives of decentralized finance are:
create a decentralized market, that is, devoid of controls by governments and banks as well as by representatives of the so-called “high finance”. Use cryptocurrencies (tokens) as currency, allow users to obtain (and disburse) loans in a simple way and without the controls of the banking system, reduce the fees charged by the traditional financial system on loans, deposits and transfers.
Decentralized finance and cryptocurrencies
The F inanza Decentralized , or DeFi, allows the use of different blockchain criptovalute to buy them or dispense and obtain loans (always in digital currency) without intermediaries and in an automatic way. Currently, the most active cryptocurrency in DeFi is Ethereum.
Decentralized finance and smart contracts
Lending based on risk appetite through so-called smart contracts is one of the most successful services in DeFi. The smart contract s is automatically performed as soon as both parties meet the conditions that have signed: work without any control and without intermediaries. They can be used in multiple fields.
The smart contract s have the advantage of speeding up the agreements between the parties and to contain costs. They work based on a democratic system where users of the Blockchain always have the option to approve or reject the terms contained therein, along with their fulfillment.
Principles behind decentralized finance
The applications of DeFi are numerous: some of them are easy to use as they follow the traditional system; others are more complex. In general, it is a system similar to the banking one: within it, it is possible to obtain or grant loans on the basis of interest. However, it is digitized and without intermediaries and is based on smart contracts : it is therefore faster and has lower costs. It is also based on the so-called stabecoin, or cryptocurrency tokens less volatile than others, whose price is pegged to that of the US dollar.
Among the most frequently used applications in DeFi is DEX. DEX is based on smart contracts and provides:
the absence of exchange operators
the absence of registration
the absence of identity checks
the absence of withdrawal fees