Categories
Crypto University

DeFi (Decentralized Finance) explained in 3 mins

What is the concept behind decentralized finance and layman terms and how it is revolutionary in nature. What are the downsides of it?

Alright, so the basic concept of decentralized finance is to create all of these composable Basic Finance Primitives that are implemented as smart contracts with some degree of decentralization. And one of the things we’re going to be talking about today is what exactly does it mean to say some degree of decentralization.

There’s a balance to strike in how decentralized a platform is between fully decentralized where no one has any control and if something goes wrong all of the funds go poof as we saw with the Dow to some what decentralized with some governance overrides, maybe an escape hatch for when problems happen to shut down the smart contract and refund funds and of course not so the centralized. When a when there are effectively management keys that allow all of the functions of the smart contract to be overridden by a small number of parties and there’s all of the range in between. So that’s the decentralized and DeFi. Of course, the five-part means that this is primarily focused on financial products and that means lending investing borrowing of course saving implementing various forms of currency.

All kinds non-functional tokens various forms of asset-backed tokens and things like that crowdfunding and crowd raising or fundraising mechanisms such as what are they called token bonded curves? Yes. That’s the fancy term used in the ethereum space and for the most part we’re talking about DeFi. I as a function that has come out of the development of aetherium. But of course defy isn’t restricted to a theorem quite the opposite Defiance and entire industry and the best way I’d like to describe Defiance by contrast to see if I see if I of course is centralized Finance. That’s when somebody else takes your money abuses it to implement political favors in their benefits and then the charges

You for the privilege of them holding your money and perhaps if you’re lucky they give it back to you perhaps not while enriching themselves unfairly in a parasitical codependent relationship with government. That’s CeFi. so DeFi really can’t fail unless it becomes CeFi because CeFi is already an incredibly damaging parasitic system that plagues our planet. So DeFi is an approach that is primarily focused on the centralizing the power Dynamic. That’s the real key here who has power over money and buy the centralizing power of the money. What opportunities does that give people to have better relationships with their money and not be exploited as well as how does that increase access to financial services by disintermediating all the gate?

Papers that prevent and the limit access to financial services effectively banking the unbanked or the banking all of us.