How do I use web3? DeFi DeFi: In code, we trust?

DeFi: In code, we trust?

Now that you have a good understanding of traditional finance, it’s time to cover the ins and outs of DeFi.

DeFi enables users to borrow, lend, trade, and transact without intermediaries, and all of this is made possible through blockchain technology. As an infant industry, individuals and businesses are exploring new ways and features that can be built within this ecosystem.

While both Bitcoin and Ethereum use blockchain technology, most DeFi activity occurs on Ethereum due to its smart contract functionality. Smart contracts allow DeFi applications to overcome the limitations of traditional financial institutions by reducing human errors and mitigating greed through blockchain’s transparency. Additionally, services can no longer be gatekept.

📑 Smart contracts are covered in a later chapter, but if you want to skip ahead, feel free to do so.

Blockchain technology is the foundation of DeFi. And DeFi encompasses a wide range of financial applications built on top of this network.

DeFi applications generally share the following characteristics:

  • Decentralization: users deal directly with each other, without intermediaries like a bank.
  • Transparency: the blockchain provides a permanent and immutable record of transactions that anyone can view, verify and audit at any time.
  • Open and permissionless: accessible to anyone with an internet connection, regardless of location or identity.
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