Decentralized Finance is an emerging technology in which all finance are based on distributed ledger as such in crypto currency.
As Now you have any financial transaction a centralized power like bank and development authority works have control over it.
For example if you deposit a sum of amount in bank then bank will give you interest on you amount deposited.
The person who have deposited the money didn’t have any idea about where their money has gone. May bank lends that to someone at higher interest rates that banks are paying you, but Defi all the transaction have clear transaction record and available to all. For example “A” have 100 USDT and “A” want to invest and earn some income from it and “B” have a 1 Unit of Bitcoin and “B” wants to some in mortgage of their bitcoin.
In this case “A” will earn interest on their USDT and will USDT in mortgage of Bitcoin.
How does D1efi Works :-
Defi works on use of blockchain , that is based on Ethereum in many Defi operation. By the help of smart contract Defi model work on Ethereum based blockchain . A smart contract is a application runs on a blockchain. Smart contract had distributed ledger and encrypted with cryptographics encryption.
Actually it define the term and condition for execution of a given operation. Instead of central authority , smart contract are used to perform the financial transaction that is specified in contract.
Crypto currency are hold smart contract that is sent from one person to another as specified.
In Defi modal it uses smart contract this process empower the individual user.
Uses of Defi :-
1. Payments :- Defi model can enables P2P transaction without any need of control authority.
2. Lending :- Defi model able to lend or borrow crypto currency by using smart contract method.
3. NFT’s :- Helps user to get Non-fungible token of trading.
4. Yield farming :- Those who wants to earn from their investment in crypto currencies , by using Defi.
5. Stable Cion :- A common use of Defi is stable coin. The only Purpose of using stable coin is control the volatility of crypto currency.
Pros of Defi :-
1. No third parties involve in Defi.
Actually Defi follow decentralized method so third party involve in transaction. The transitor or receptor are the only parties involve in it.
2. Parties will their profit directly.
3. No commission or hidden charges is applied on the Defi.
4. No centralized or governed by an authority of banks.
Cons of Defi :-
1. Defi is still at their infant age.
2. Application can be hacked to lack of any loop in programming.
3. It may subjected to hack and theft.
Top 5 platform that supports Defi models :-
1. Avalanche
2. DYdX
3. Index Cooperative
4. Maker DAO
5. True Fi
