The DeFi movement promises to bring a lot of benefits to customers and investors, including eliminating intermediaries and central oversight, making financial markets more accessible to retail investors and creating new investment opportunities. To achieve their lofty ambitions, DeFi developers are making use of some fundamental properties of blockchain technology.

Permissionless

The term ‘decentralized finance’ is already a clear indication of what the DeFi movement considers to be its defining feature. That’s hardly surprising. Decentralization is at the heart of blockchain’s value proposition. The aim is to move away from relying on corporations and other institutions for oversight, server space, data storage and so on. Blockchain networks achieve this by ensuring that one transaction history is shared among all of their members.

The decentralized approach can help democratize banking and finance by ensuring easy access to financial services for everyone.

Most DeFi apps run on Ethereum, the second-largest blockchain protocol, after Bitcoin. As a permissionless (public) blockchain, Ethereum is highly decentralized and readily accessible to anyone interested in building or using a DeFi app. In addition, the permissionless nature of the blockchain, as well as the interoperability it enables, opens the door for all kinds of third-third party integrations.

It is important to note that these features are not exclusive to Ethereum. However, being the leading network for smart contract development has positioned Ethereum as the preferred platform for building not only DeFi applications but also other types of decentralized apps (dApps).