top of page

What is Decentralized Finance (DeFi)?

Updated: Jun 2, 2022

What is Decentralized Finance (DeFi)? | AlgoBlocks
What is Decentralized Finance (DeFi)?

What is Defi?

Decentralized Finance, more commonly known as DeFi in the blockchain industry, is a rapidly growing ecosystem of financial services and apps that exercise peer-to-peer transactions instead of relying on a central authority.

Let’s unpack that here:

1. It’s a protocol for financial services and apps

DeFi is a system built on the blockchain that provides the same services of traditional financial institutions, but better. We’ll explain in a bit.

2. It exercises peer-to-peer transactions

DeFi transactions can be carried out without the middleman or you can directly transact with another individual or entity over the blockchain with an internet connection

Typically, the transactions are bound as smart contracts or code added on the blockchain, which cannot be altered or deleted.

What are the known benefits of DeFi?

While the concept of DeFi started at arguably the same as Bitcoin, the services and applications have only been gaining traction in recent years.

Here are the known benefits of decentralized finance to start:

  • Financial services for anyone, anywhere

One of the main benefits of DeFi is the low entry barrier to access the services. There are people who may not have the ability to fulfill bank requirements, such as the unbanked and underbanked. DeFi makes it all possible.

  • Better transparency and security

But those requirements are legal necessities to avoid security risks you say? DeFi is built on the blockchain, which is open-source, meaning anyone can check the code. It is encrypted but fully transparent and even