Beginner’s Guide to Decentralized Finance (DeFi)

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Beginners Guide to Decentralized Finance (DeFi)
Decentralized finance (DeFi) is a variety of
financial applications that are built using block
chain technology. More specifically,
decentralized finance can also be referred to as
a movement that focuses on providing an
open-source, permission less, and transparent
financial system that is available to everyone
and can operate without the need for any central
authority.
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What are the main advantages of decentralized
finance?

• With traditional finance, users rely on
  centralized institutions such as banks to act as
  intermediaries when using financial services.
  DeFi applications do not use any intermediaries.
  The apps are able to resolve every possible
  dispute, which makes users have control over
  their funds at all times. Because of this, the
  costs associated with providing and using these
  products are reduced, which allows for a more
  frictionless financial system. Since these new
  financial services are created on the blockchain,
  single points of failure are eliminated. All the
  data is recorded on the blockchain and sent to
  different nodes, making it hard to potentially
  shut down a service or hack a system. The
  frameworks for DeFi applications are built in
  advance, thats why deploying one becomes less
  complicated but more secure.

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• Another crucial advantage of an open system is
  its accessibility allowing individuals who dont
  have access to any financial service to have
  access to it. Because the traditional financial
  system relies on the intermediaries making a
  profit, they dont usually offer their services
  on locations with low-income communities. With
  the use of decentralized finance, the costs of
  financial services are significantly reduced,
  creating access to low-income individuals
  allowing them to benefit from a broader range of
  financial services.  With DeFi, users can have
  full control over their assets and interact with
  the system through peer-to-peer (P2P) and
  decentralized applications (dApps). The core
  feature of decentralized finance is its
  accessibility, even to those who are isolated by
  the current financial system. Another benefit of
  DeFi is the modular framework it is built upon.
  These interoperable DeFi applications on public
  block chains will potentially create new
  financial markets, services, and products.

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What are the main advantages of decentralized
finance?

• With traditional finance, users rely on
  centralized institutions such as banks to act as
  intermediaries when using financial services.
  DeFi applications do not use any intermediaries.
  The apps are able to resolve every possible
  dispute, which makes users have control over
  their funds at all times. Because of this, the
  costs associated with providing and using these
  products are reduced, which allows for a more
  frictionless financial system. Since these new
  financial services are created on the block
  chain, single points of failure are eliminated.
  All the data is recorded on the block chain and
  sent to different nodes, making it hard to
  potentially shut down a service or hack a system.
  The frameworks for DeFi applications are built in
  advance, thats why deploying one becomes less
  complicated but more secure. 

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• Another crucial advantage of an open system
  is its accessibility allowing individuals who
  dont have access to any financial service to
  have access to it. Because the traditional
  financial system relies on the intermediaries
  making a profit, they dont usually offer their
  services on locations with low-income
  communities. With the use of decentralized
  finance, the costs of financial services are
  significantly reduced, creating access to
  low-income individuals allowing them to benefit
  from a broader range of financial services.  

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The potential use cases of decentralized finance

• There are several use cases of decentralized
  finance. Here are some of them 
• Cryptocurrency
• According to a report published by Jenco, a
  decentralized financial service platform,
  digital assets, usually in the form of
  cryptocurrencies like BitCoin and Ethereum, are
  used by computer networks all over the world.
  These digital assets are made secure by using a
  method called cryptography that prevents
  double-spending and counterfeiting.The
  blockchain, a ledger that is distributed and
  enforced by a separate web of computers,
  guarantees these cryptocurrencies integrity. One
  of the most distinctive traits of these digital
  assets is that they are not and can not be
  manipulated or controlled by any centralized
  authority.

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Borrowing and Lending

• Open lending protocols, such as Jenco, are
  one of the most popular types of applications
  that are offered in the decentralized finance
  system. There are many advantages of an open,
  decentralized borrowing, and lending over the
  traditional credit system. These advantages
  include no credit checks, the ability to
  collateralize digital assets, instant settlement
  of transactions, and potential standardization in
  the future. These lending services are built on
  public blockchains, they reduce the amount of
  trust needed and have the assurance of
  cryptographic verification methods. Lending
  applications on the blockchain reduces
  counterparty risk, makes borrowing and lending
  faster, cheaper and accessible to more people.

Conclusion
There are other potential use cases of DeFi, but
the most widely used ones are the one mentioned
above. Decentralized finance is focused on
building financial services separate from the
traditional centralized systems. As a result,
there will be a more open financial system in the
future that could potentially prevent censorship
and financial discrimination all over the world.