What is DeFi and how does it work? Know full details about it

The entire transaction of the DeFi system takes place on an algorithm based blockchain technology. Smart contracts completely remove the redundant paperwork that is used to complete contracts in traditional protocols.

New Delhi, Tech Desk. DeFi is a decentralized finance facility, based on blockchain technology, that allows users to borrow and lend in cryptocurrencies. As the name suggests, DeFi is a new alternative to the age-old centralized finance facility. For those who are not aware of DeFI, centralized finance can be understood as a banking system that restricts people from owning and controlling their own assets. During this DeFI is seen in the picture. In the case of cryptocurrencies, decentralized finance gives you complete control over your assets. Meaning you can do the work of borrowing, withdrawing, depositing money at any time without any limit and without interference from any government institution.

EasyFi NetworkAccording to Anshul Dhar , COO and co-founder of , what needs to be noted in the case of DeFi is that there is not a single invention of it. And these products do not require the use of any third party to facilitate loans and borrowings in crypto. No broker is required to trade on DeFi.

2. Importance of DeFi

First, DeFi does not rely on any third party or broker for transactions, which is completely different from traditional methods of banking. This means that there is no centralized authority involved in the DeFi system. In such a situation, the question arises whether the use of DeFi can be called a smart contract? Simply put, the entire transaction of the DeFi system takes place on an algorithmic based blockchain technology. Smart contracts completely remove the redundant paperwork that is used to complete contracts in traditional protocols.

2. Second, funds can be transferred instantly. Also, the rates of this transaction are the least in the current era as compared to the old banking system. However, transaction costs vary by blockchain network. Blockchain technology is a digitally distributed, decentralized, public ledger that exists on a network. Simply put, all transactions that users make on DeFi are stored in a database that can be viewed by everyone. This ensures greater transparency in transactions and is free from any interference by centralized financial agencies.

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