The definition of DeFi is a concept of a financial ecosystem living digitally on a shared infrastructure.
DeFi is an open-source economic framework with a specialization for the internet age on a worldwide scale.
How are DeFi applications produced?
How do you use DeFi products?
What can you do with DeFi?
Decentralized finance leverages key principles of the Ethereum blockchain to increase financial security and transparency, unlock liquidity and growth opportunities, and support an integrated and standardized economic system.
1. Programmability. Highly programmable smart contracts automate execution and enable the creation of new financial instruments and digital assets.
2. Immutability. Tamper-proof data coordination across a blockchain’s decentralized architecture increases security and auditability.
3. Interoperability. Ethereum’s composable software stack ensures that DeFi protocols and applications are built to integrate and complement one another. With DeFi, developers and product teams have the flexibility to build on top of existing protocols, customize interfaces, and integrate third-party applications. For this reason, people often call DeFi protocols “money legos.”
4. Transparency. On the public Ethereum blockchain, every transaction is broadcast to and verified by other users on the network (note: Ethereum addresses are encrypted keys that are pseudo-anonymous). This level of transparency around transaction data not only allows for rich data analysis but also ensures that network activity is available to any user. Ethereum and the DeFi protocols running on it are also built with open source code that is available for anyone to view, audit, and build upon.
5. Permissionless.Unlike traditional finance, DeFi is defined by its open, permissionless access: anyone with a crypto wallet and an Internet connection, regardless of their geography and often without any minimum amount of funds required, can access DeFi applications built on Ethereum.
6. Self-Custody. By using Web3 wallets like MetaMask to interact with permissionless financial applications and protocols, DeFi market participants always keep custody of their assets and control of their personal data.
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