I have to admit: Decentralized Finance – or “Defi” – is one of the most fascinating aspects of the blockchain and cryptocurrencies. In fact, it’s defi that got me really excited about crypto in the first place.
So, let’s get to it!
At its heart, defi uses the blockchain to make complicated things happen while cutting out the middleman in the process. Here’s what I mean...
Right now, finance is run by a hub-and-spoke model. And that model hasn’t changed much in a long, long time. In fact, it’s pretty much the same as it was before sophisticated computers and large financial networks.
And you can see why: The hub-and-spoke model organizes most financial transactions into large financial centers around the globe, such as New York and London. When financial transactions are made, activities are generated in one of these centers. Those institutions then determine the details of the transactions and make sure that they are carried out like all the parties intended.
Really, not very complicated. And for the most part, it’s not a bad system. Continue reading "What The Heck Is Defi?"