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Decentralized finance(DeFi) is gradually overtaking the global financial system in terms of borrowing, investing, and banking. What is DeFi and its role in the digital economy?
Decentralized finance (DeFi) refers to a modern financial system that is set to replace the role of the traditional financial system. The roles include banking, brokering, investing, and borrowing. Built on blockchain technology, DeFi replaces the need for trusted middlemen in financial agreements.
Smart contracts play the role of traditional custodians like banks, ensuring contract terms stay unchanged using blockchain capability and executing the contract on maturity. People can engage in the mentioned financial activities from anywhere and at any time across the globe.
So, what are the trends in DeFi?
Using self-executing code in handling transactions, platforms such as Aave, Uniswap, and Compound offer users DeFi services. Users can borrow loans, earn interest on staked tokens, and trade tokens anywhere at any time.
DeFi emerged in 2018, pioneered by the Ethereum blockchain, and has ever since seen growing interest from investors and regulators. DeFi could see exponential growth over the next decade as crypto adoption grows.
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