INTRODUCTION
*DeFi is the acronym for the term *Decentralized Finance* and is currently one of the fastest-growing sectors in the blockchain* and cryptocurrency space. DeFi has grown very rapidly in the past one year but materials to help people grasp the idea of DeFi lagged behind.
DeFi is an ecosystem of Decentralized Applications (Dapps) that provide financial services built on top of distributed networks with no governing
authority. A majority of the DeFi Dapps currently being built are on the Ethereum blockchain, so for purposes of brevity, this will be the focus in this teaching..
DeFi has been the key theme in Ethereum’s development in 2019 and 2020. At this point of writing, DeFi Dapps have locked up over $1 billion worth of cryptocurrencies. DeFi is expected to grow further in the coming years and is a key component in fulfilling *Ethereum’s lofty vision
Point 1: Introduction To DeFi
Decentralized Finance often called DeFi is simply the migration/shift from traditional, centralized financial systems to peer-to-peer finance enabled by decentralized technologies built on reputable blockchains. Ethereum blockchain is undoubtedly the most reliable, popular and the most used blockchain in DeFi, though there are also other blockchains that powers DeFi.
The whole world of crypto in its entirety is known for its attribute of decentralization but there are other centralized entities in the crypto space like centralized crypto exchanges. The aspects of the crypto space that is based on complete/absolute decentralization forms the DeFi ecosystem.
From lending and borrowing platforms to stablecoins and tokenized BTC, the DeFi ecosystem has launched an expansive network of integrated protocols and financial instruments that are capable of elevating to the roof of financial freedom Now with over $20 billion worth of value locked in Ethereum smart contracts, decentralized finance has emerged as the most active sector in the blockchain space, with a wide range of use cases for individuals, developers,
DeFi is not a single product or company but is instead a set of products and services that acts as a replacement for institutions ranging from banking, insurance, bonds and money markets. DeFi Dapps enable users to combine their services to open up multiple possibilities. It is often called money LEGOs due to its composability. In order for DeFi Dapps to work, it usually requires collateral to be locked into smart contracts. The cumulative collateral locked in DeFi Dapps is often referred to as the Total Value Locked. According to DeFi Pulse, The total Value Locked at the start of 2019 measured around $275 million but in February 2020, it reached a high of $1.2 billion. The large growth of Total Value Locked serves as an indicator of the rapid growth of the DeFi ecosystem.