Technologies Behind Crypto-Based Decentralized Finance

Understanding Decentralized Finance

Nearly all banking, lending, and trading facets are controlled by current centralized systems run by authorities and gatekeepers. To access anything from auto loans and mortgages to trading stocks and bonds, regular consumers must interact with various financial middlemen. For instance, the Securities and Exchange Commission (SEC) and the Federal Reserve determine the regulations for the world of centralized financial institutions and brokerages in the United States, and Congress periodically updates the laws. Consequently, consumers have few direct access points to capital and financial services. As a result, they cannot avoid intermediaries like banks, exchangers, and lenders who profit from each financial and banking transaction by taking a cut. DeFi, also known as DeFi, opposes this centralized financial system by emancipating familiar people through peer-to-peer trades and delegitimizing mediators and gatekeepers (Zetzsche et al., 2020). Decentralized finance is made possible by critical technologies like blockchain and cryptocurrencies.