Decentralized finance, or DeFi, represents a new frontier for the financial sector, aiming to provide financial services without the intermediation of centralized intermediaries such as banks and insurance companies. DeFi is based on blockchain technology, which allows transactions to be recorded and verified securely, transparently, and immutably.
The underlying concept of decentralized finance is that users can have full control over their funds and personal information without relying on centralized third parties. In DeFi, users can earn interest on their funds, trade cryptocurrencies and digital tokens, and access decentralized financing.
To understand how decentralized finance works, it is necessary to comprehend the role of so-called smart contracts. These contracts are automated programs that execute transactions based on predefined rules and run on a public blockchain. Users can interact with these contracts through cryptographic wallets and decentralized applications (dApps), which serve as a user interface.
For example, a smart contract can be used to create an investment pool where users deposit their funds and earn interest. The contract ensures that interest is distributed fairly to all participants and that the funds are secure and protected.
In conclusion, DeFi represents an evolution in the financial sector that aims to provide decentralized, secure, transparent, and rule-based financial services. Blockchain technology and smart contracts are the cornerstones of this new frontier, offering users full control over their funds and personal information.
