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In recent years, a quiet but powerful movement has started rewriting the rules of money. It’s called DeFi, or Decentralized Finance, and its premise is simple yet radical: to build a global financial system that’s open to everyone, without needing banks, brokers, or any other middlemen.
DeFi is an ecosystem of financial applications built on the blockchain. Unlike traditional finance (TradFi), where banks control your funds and decide who gets access to credit or what fees they charge you, DeFi cuts out the middlemen. Transactions and agreements are automatically executed through code (called smart contracts) on a public network. This makes finance transparent, accessible to anyone with an internet connection, and much faster and cheaper.
The main challenge to TradFi is decentralization. Instead of relying on a central authority, you trust the code and the network. If the code is auditable and the network is secure, the possibilities are endless.
DeFi isn’t just one single application; it’s a series of components that "stack" on top of one another, creating an interconnected ecosystem.
Base Layers: Everything is built on a blockchain. While there are many, the biggest one for DeFi is Ethereum. This layer is the infrastructure where smart contracts live and where transactions are verified.
Digital Assets: Money in DeFi isn’t fiat currency (like the dollar), but cryptocurrencies. There are major coins like ETH and Bitcoin, and also stablecoins like USDC or DAI, whose value is pegged to real-world assets, usually the US dollar, which reduces volatility.
Protocols: These are the smart contracts that govern the applications. Think of them as the "banks" or "exchanges" of DeFi, but they operate without human intervention. The most common ones are for lending, exchanges, or Yield Farming.
Applications (dApps): This is the interface you use to interact with the protocols. A dApp could be a platform to swap tokens, an app to take out a loan, or a decentralized insurance service.
Decentralized Exchanges (DEXs): These are like traditional exchanges, but without a central authority. You can trade your cryptocurrencies directly with other users through smart contracts.
Lending and Borrowing: You can deposit your assets for others to borrow, earning interest for it. Or you can borrow money yourself, using your own assets as collateral.
Yield Farming and Staking: This is essentially the act of locking your assets in a protocol to earn rewards. It’s like an automated investment, but instead of interest, you earn the protocol’s tokens.
Insurance: You can buy insurance against smart contract bugs or other risks specific to the technology.
Pros:
Financial Inclusion: Anyone can participate, regardless of their country or social status.
Transparency: All transactions are public and verifiable on the blockchain.
Efficiency: There’s no red tape, which makes transactions nearly instant and cheaper.
Cons:
Volatility: The crypto market is highly volatile, which can impact the value of your assets.
Smart Contract Risks: If the code has a bug or is hacked, funds can be lost.
Complexity: The learning curve can be steep for newcomers.
To participate in DeFi, you need a crypto wallet (like MetaMask) that connects to the network of your choice. Through that wallet, you can interact with dApps, deposit your assets, take out loans, or swap tokens, all without needing a bank.
Lenonmc21
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Remember that “Module 1” of the “DeFi” course I am teaching is now complete at @paragraph I know that many of you know what it is and how it works, but let's face it, there may be new users who are not fully familiar with these topics in decentralized finance, so I am providing valuable information that not many people share. In addition, I will soon be sharing a trading course, sharing my strategy, although I am not a trader of memecoins or tokens with lower capitalization. The liquidity and capital I have, although limited, is focused on trading $BTC, $ETH and other more liquid assets. Would you even like a “Delta Neutral” type trading course? Here is “Module 1”: cc: @yerbearserker @bizarrebeast @diviflyy @artstudio48 https://paragraph.com/@lenonmc21/module-1-the-decentralized-finance-defi-revolution?referrer=0x2e1b03a953CE8F6294443F02Ad9a87a6dac94958
I have already released the complete version of “Module 1” of the course I am teaching on “DeFi.” You can take a look and leave your comments, whether to improve or to request a specific type of content you want to learn about. I will be happy to explain it in a post. You also have part of this course in “Zora,” which is also a power-up in my empire “LenonVerse,” which I will leave for you in the next comment. 👇 👇 https://zora.co/coin/base:0x4ca266f601706e56f081a1bef3cf3f7c8208d312?referrer=0xb118d7feb389fb459df1a2097804622762f246c8
Join "LenonVerse." https://www.empirebuilder.world/empire/0xcC6ca2775F562603C0BdB9e9D87043d523688b07?cache_bust=1757705087151