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What is DeFi

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25.07.2023
5min.
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What Is DeFi: An Ultimate Guide To The World Of Decentralized Finance

Centralized finance has been the only available option for many years. After the launch of Bitcoin, the industry started to change. People from all over the world got the opportunity to use cryptocurrencies, send their money to other people, and store it in their virtual wallets. Bitcoin is open to anybody, unlike centralized finance. DeFi took this principle one step further. But what is DeFi in crypto? This emerging field is quickly gaining popularity among those who want more freedom when it comes to finance. Transactions are cheaper, faster, and more secure. So what is DeFi in the crypto world, and how can it become the driving force behind the changes in the finance industry? Let’s find out!

What is DeFi

DeFi (decentralized finance) is a relatively new technology that allows users to avoid a middleman when it comes to transactions and make them directly with other people. This means that when it comes to DeFi, there are no fees that are usually charged by banks and other companies. Plus, literally anyone with the Internet can use DeFi. That’s why nowadays, many people are wondering: what is DeFi in crypto?

If we are talking about centralized finance, it’s the other way around. Money is held by third parties, who distribute it between the participants of a deal and charge them for the services.

Decentralized finance, on the other hand, uses security protocols, software, and connectivity to provide its services. They give users more control over their funds through wallets and trading services.

DeFi uses blockchain technology with dApps handling transactions on it. All the information about transactions is stored in the blockchain, which provides a high level of security. Plus, there are smart contracts that make sure that each transaction is complete.

What are smart contracts? They are self-executing contracts (or computer programs) that automatically execute when all the conditions are met. They execute a certain business logic programmed by their creators.

Those who are interested in DeFi can use a wide range of decentralized exchanges (DEXs) like WhiteSwap and other platforms.

WhiteSwap is a part of the WhiteBIT ecosystem and has a skilled team behind it as well as over 5 years of experience. No central authority and more control to users.

How to invest in DeFi

Many platforms like WhiteSwap offer various tools for those who want to earn on DeFi. WhiteSwap, being a decentralized exchange (DEX) gives its users an opportunity to:

  • receive a profit from fees paid by other users by providing liquidity into liquidity pools;
  • become a co-owner of the platform itself by getting the governance token. To do so, users need to provide liquidity to one of the pools, receive an LP token, then stake it in a staking pool, and claim the governance token (WSD). Or simply buy it on one of the partner exchanges. WSD token holders can vote on changes and manage the project.

What is DeFi staking? It is something similar to a bank deposit. Users are locking their assets in a smart contract in order to earn their interest rate.

What is DeFi cryptocurrency? There is no such thing as a certain DeFi crypto. Any asset can be a DeFi crypto, even a new one. However, when creating a token a looking for a place to list it, pay attention to the blockchain. Some platforms have multiple chains, which means you can list your DeFi crypto if it has the same blockchain.

Benefits of DeFi

But what makes decentralized finance so great? There are a number of benefits of DeFi that may attract your attention:

  1. It is easily accessible. There are no restrictions, and anyone with the Internet can access a platform of their choice.

  2. Fees are lower, while interest rates are higher. The parties can negotiate interest rates directly.

  3. It is safe. What gets into the blockchain stays in the blockchain forever. So it cannot be changed, and anyone can view the data. Plus, smart contracts regulate every transaction.

  4. It is autonomous. DeFi platforms are independent of centralized financial institutions.

  5. It is more flexible. Trading hours are not as limited as they are when it comes to centralized finance.

Disadvantages of DeFi

Of course, there are some drawbacks when it comes to DeFi. However, they can be eliminated by practice and certain security measures. Naturally, DeFi is a relatively new field in the world of finance, which means there are some things that can be improved. That’s why there are still some questions as to DeFi meaning in crypto. Here are some of the cons that should be considered before using DeFi:

  1. DeFi can seem difficult to understand at first. That’s why one needs practice. The interface on a DeFi platform may be different from what users are used to, and since such platforms give users full autonomy, they need to be extra careful with their transactions.

  2. There is a risk of scams. Just like anywhere in the financial world. This means users should be more cautious with who they trust, who they are working with, and which e-mails can’t be opened.

  3. Don’t forget about volatility. Obviously, unlike state currencies (fiat), cryptocurrency means volatility. One should keep it in mind and avoid putting all eggs in one basket: diversify your portfolio just in case.

Why is DeFi so important

There are a few reasons why is DeFi important. DeFi (decentralized finance) lets people do the things offered by centralized financial institutions while presenting new opportunities and solutions all the time. It gives users an opportunity to trade, stake, lend, and earn. Decentralized finance is a revolutionary thing since it allows solving the problems that existed in centralized finance and acts as a driving force of changes in the finance industry in general.

Yes, DeFi (decentralized finance) is relatively new and may be difficult to understand for those who never dealt with something like blockchain and crypto. However, the benefits of DeFi outweigh any doubts. It has already attracted the attention of investors, influencers, and businesses. Platforms like WhiteSwap are among the pioneers in the world of DeFi crypto. And we are sure that there will be more changes and opportunities in the upcoming years.

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