Decentralized Finance (Defi) Explained!

Decentralized Finance (Defi) Explained!

In these past few years, we all have seen constant fluctuations in the economy due to the pandemic, giving rise to extreme mental and financial crises for people all over the globe. The artists and creators started experiencing these predicaments even before the pandemic emerged due to a lack of proper means and resources. With that said, many people reading this article might relate to this situation.

In this article, we will thoroughly delve into what is a Defi? What is the method/how does it work? Last but not least, how Create plans to bring Defi into the lives of the people?

All that said, now we shall dive further into the meaning of Defi.

What is Defi?

Decentralized Finance or Defi can be explained as a rapidly growing financial technology that is open, accessible to all, and based on the underlying secure peer-to-peer network now commonly known as blockchain technology.

Contradictory to Centralized Finance which is very rigid with zero transparency, Defi provides its users the means to access the open and secure system of blockchain technology to manage their money without the hassle of doing any paperwork and with zero intervention from any intermediary. In fact, anyone with a stable internet connection can get access to Defi services.

To fully understand the inner workings of a Defi, we first need to work out how Centralized Finance differs from Decentralized Finance.

DeFi VS CeFi

  • In decentralized finance, you have complete control over your money, contrary to the centralized way where third parties like banks and other financial institutions hold the full authority of your money.
  • The transactions in Defi take only a few minutes to process, while on the other hand, it may take days for transactions to process traditionally.
  • The service fees are significantly lower in Defi as compared to Cefi.
  • You can access the services from anywhere and whensoever through decentralized finance in contrast to Centralized finance, where you can avail the services only upon a fixed duration of time at a readily allocated location.
  • Defi provides absolute transparency to its users in contrast to Cefi that is opaque.

How does it work?

Decentralized finance (Defi) uses a distributed and secure database or ledger else known as blockchain technology. Blockchain is run by Decentralized Applications or DApps that are employed to manage transactions to and fro.

Defi uses smart contracts to handle and keep track of all the transactions in place of a financial institution. Smart contracts are coded programs stored and implemented on a blockchain network. They generally automate the execution of an agreement when the set predetermined conditions are satisfied so that multiple parties can come to a shared result in an accurate, timely, and tamper-proof manner without the intervention of any third party.

These contracts are open and easily accessible to all for inspection purposes. Users are generally using Defi with the help of DApps, whose functions are simplified as there is no requirement for an account or other useless paperwork.

With the help of Defi, people all around can:

·        Lend money to those in need.

·        Borrow money from those who are willing to lend.

·        Preserve/ save money for future uses.

·        Send/receive money effortlessly within a few minutes

·        Trade with ease.

CREATE has set its sight on bringing about a much-needed change from the old unfair ways to empower the artists /creators and give them freedom from financial insufficiency. And the advanced technology of Defi is the ultimate key to achieving that.