What Is Decentralized Finance or DeFi?
Decentralized finance (DeFi) apps are cryptocurrency services that do not rely on a central authority, and which are relatively open and unrestricted.
There are several categories of DeFi services. Here are a few:
1. Payments. Projects like the Lightning Network, Raiden Network, and BTCPay allow users to perform transactions and accept payments. They power transactions on a larger scale than their parent blockchains (Bitcoin and Ethereum) typically allow.
2. Exchanges. Decentralized exchanges like Kyber Network, Bancor, and Switcheo allow users to trade cryptocurrency privately and securely. Users do not need to identify themselves, and decentralized exchanges do not hold any funds.
3. Borrowing and lending. Projects like bZx, Maker, and Nuo allow users to borrow one cryptocurrency for another cryptocurrency. Additionally, these projects typically give users a way to earn interest by lending out their cryptocurrency.
4. Token marketplaces. Sites like OpenSea, District0x, and Enjin Marketplace allow users to trade “cryptocollectibles”—rare crypto tokens that are similar to virtual Pokémon cards or commemorative coins.
5. Prediction markets. Apps like Augur and Bitcoin Hivemind allow users to place bets on the outcome of real-world events. This type of betting is highly regulated and restricted on traditional financial platforms.
Many DeFi platforms are built on Ethereum instead of Bitcoin. To use them, you can quickly swap your BTC for ETH through sites like Liquality.
Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.