Have you been closely following what has been trending?
Cryptocurrency is one of the hot topics you probably do not want to miss.
And from it, concepts like DeFi (decentralized finance) have been born.
So, what is DeFi (decentralized finance)?
This is a financial concept that eliminates the need for intermediaries or centralized financial parties.
It uses an open ledger that is accessible to all users who have different roles such as approving and making changes.
The DeFi (decentralized finance) operations are done on blockchain technology, which is transparent to all users and secure to avoid infiltration from outsiders.
Layers of DeFi (Decentralized Finance) Stacks
The software stack in a DeFi setup has different layers with different functions.
Layer 0, also called the settlement layer, is the base for all functions.
This is just the blockchain and native cryptocurrency. Think about the Ethereum platform and the ETH coin.
Next comes the protocol layer, which acts as the governing rules of operations.
It sets the standards through which all of the smart contracts are created and ran.
Multiple users and entities can use the protocols at the same time due to their interoperable nature.
The application layer is next.
This is where the consumers and users of the application come in.
For instance, an application where the consumers can save crypto to earn interest or borrow crypto coins against their saved digital assets.
Finally, the DeFi (decentralized finance) operations have the aggregation layer. The involved aggregators interconnect the services.
They provide different services such as crypto exchange or investment through a tech-based framework.
If you are interested, navigate to this web-site to learn more.
Benefits of DeFi (Decentralized Finance)
- Transparency – Of course, we have already mentioned this benefit because it is the main one. With no centralized operation, all users are free to view the transaction and edit transactions within their access rights. The blockchain also records logs for all transactions, for example the crypto coins transacted, approved, and other information.
- Saving cryptocurrency – Saving cryptocurrency, also called holding, is a popular product thanks to DeFi (decentralized finance) platforms. Holders (sometimes known as “hodlers”) earn interest for saving their cryptocurrency where one could earn up to 12% APY on stablecoins.
- Ability to borrow and lend – If you want to invest in crypto, for instance lend your digital assets to earn interest, DeFi (decentralized finance) platforms will give you an opportunity to do so. It is also the same case when you want to borrow cryptocurrency against your saved crypto.
- Tokenization – Is it possible to discuss the benefits of DeFi (decentralized finance)? No. Through the smart contracts facilitated by platforms such as Ethereum, numerous tokens have been created and used in many great ways to improve the products in the crypto sector. The tokens are native to various dApps for various uses such as security, promotion, airdropping, and others.
Conclusion
DeFi (decentralized finance) is quickly gaining momentum as a preferred setup for financial operations by many investors.
They like the transparency and ability to operate seamlessly in a secure environment. There are also many products to consume, which is a great thing.
If you are interested, it is time to look for a reliable aggregator to enjoy the products.