Decentralized finance, also called DeFi (Decentralized Finance) has been enjoying great success in the last period. But what is it?
DeFi can be defined as a set of new financial instruments based on decentralized tools and networks: it can be imagined as a large platform that mainly exploits the Ethereum blockchain and smart contracts.
An example can be the Eidoo wallet, which in fact offers a single and simplified interface to the various services offered by various DeFi platforms such as Compound.
The two main features of DeFi are:
smart contracts
the use of decentralized networks.
The former allow the automatic execution of various processes, such as those that manage loans between private individuals, in a safe and predictable way, while the use of decentralized networks makes their operation transparent, public, open and above all safe, as well as predictable.
- The choice of the blockchain fell on Ethereum not only because it is a decentralized network that offers the possibility of using smart contracts, but also because it allows the issuance of new tokens, for example in the ERC20 format, and because some of these are already well capitalized. .
