Understanding DeFi: A Comprehensive Explanation

Decentralized finance, or DeFi, is a financial system that operates on a transparent, decentralized blockchain without the need for a central authority like a bank. DeFi was made possible by the ideas that came from Bitcoin’s entrance onto the world stage in 2009. Unlike the traditional financial system, DeFi allows users to keep their personal information private while participating in the ecosystem. Users can take out decentralized loans from other investors like themselves and use digital assets like Ethereum or a stablecoin like Dai as collateral. Unlike in traditional finance, the collateralized debt positions (CDPs) in DeFi allow users to get two-thirds of the collateral back if they need to liquidate their crypto quickly. Getting involved in DeFi is easy and only requires a few steps.