DeFi — Decentralized Finance | 2021

Image credits: ForbesDeFi is short for “decentralized finance,” an umbrella term for a variety of financial applications in cryptocurrency or blockchain geared toward disrupting financial intermediaries.DeFi draws inspiration from blockchain, the technology behind the digital currency bitcoin, which allows several entities to hold a copy of a history of transactions, meaning it isn’t controlled by a single, central source. That’s important because centralized systems and human gatekeepers can limit the speed and sophistication of transactions while offering users less direct control over their money. DeFi is distinct because it expands the use of blockchain from simple value transfer to more complex financial use cases.Bitcoin and many other digital-native assets stand out from legacy digital payment methods, such as those run by Visa and PayPal, in that they remove all middlemen from transactions. When you pay with a credit card for coffee at a cafe, a financial institution sits between you and the business, with control over the transaction, retaining the authority to stop or pause it and record it in its private ledger. With bitcoin, those institutions are cut out of the picture.Irrespective of how vital the current financial services infrastructure is, it is plagued with many problems. The root cause of all of the engendering problems is the presence of centralized, monolithic, siloed institutions. All the transactions taking place today using legacy infrastructure are under the umbrella of a third party. Essentially, this centralized third party can have a say in who would be provided with financial services and who would not be.The working of these centralized institutions is bound by geographical barriers. It solely depends on a person’s luck if he/she was born in a developed country which would protect their individuality.DeFi has the power to put an end to problems which the contemporary financial institutions face by…