Much of what everyone should know is already in the name: decentralized finance aims to offer infrastructural support via blockchain, Cardano DEX or by using tools that we have already seen applied – albeit at a primordial level – by Bitcoin or by more advanced cryptocurrencies , at least in terms of functionality, such as Ethereum . There are several aspects that may concern decentralization and will be highlighted individually, to understand both the extent of the phenomenon and the possibilities of its applications.

The functioning of decentralized finance is based on a few – and fundamental – points

Exchange of values

Which means, very simply, payments. In this aspect, the question of old cryptocurrencies could be contested, which were never considered as DeFi but which still offer an exchange of value , or tokens. In reality, however, the newer projects, which aim to establish themselves in this specific niche, offer something more than the old generation crypto. We talk about the possibility of integration with other blockchains, directly or through other connecting blockchains, which could offer services related to payment ones.

Execution of contracts

We are talking about smart contracts , a sort of algorithm with a contract inside, which is able to go into execution whenever the right conditions are met. The smart contract is a reality that has existed for several years. But despite this, it is in the last 2 years that they have begun to take hold also for concrete uses. They are also very popular for the creation of decentralized exchanges , which have the great advantage of being faster, cheaper and safer.

Data for contracts

There are several Ddi blockchains that are concerned with providing another fundamental aspect of decentralized economy and finance: data. Because if smart contracts can have an automatic execution, today, also based on data coming from outside the world of the blockchain. There are several projects that deal with providing other blockchains or projects with reliable data , mainly for use in Decentralized Apps and contracts.

Interested loans and deposits

One of the liveliest worlds of Decentralized Finance are the systems that allow you to borrow and borrow, generally new generation cryptocurrencies and stable coins that are instead anchored to the value of a classic currency. We will see later that there are many interesting projects under this specific aspect and that allow us to have liquidity for our projects on the one hand, and to be remunerated for having deposited sums on the other.

By Brayden

Brayden who is certified financial instructor more than 5 years. She gives an opinion word of mouth to many. Firstly, she started penning down via her lines. Get instant help via her blog with ease.