DeFi…

It’s fair to say that DeFi was one of the biggest buzz words in 2020 and 2021, especially in the world of crypto. DeFi tokens at one point were the best performing digital assets, with numerous seeing huge gains. But, crypto traders and normal folks alike are still struggling to comprehend what DeFi is all about.

Decentralized Finance (DeFi) is a financial service using cryptocurrencies that can be programmed through smart contracts to build exchanges, lending services, insurance services, and more without centralized authorities.

Just like cryptocurrencies, DeFi takes away the need for a centralized entity. But the way it works remains baffling even for advanced traders. Read on to find out how DeFi works, and let’s decipher the truth if you can make money from DeFi?

CeFi…

The financial system and services today are usually centralized. For example, banks, insurance companies, investment services are controlled or offered by a centralized entity or a person. In other words, your funds in a centralized exchange are managed by a responsible party. It is up to the entity to decide the trading fees you should pay or manage your transactions and activities.

Although CeFi and DeFi aim to facilitate the use of cryptocurrencies for different financial needs, they both are executed differently.

Decentralized finance is an open system of finance, which through blockchain technology, allows for the facilitation of financial services from peer-to-peer and gives people full control of their assets.

Stipulations for such an agreement on a decentralized application (DApp) can be written in code onto the blockchain through smart contracts. So when the stipulation for the loan is met, the funds will be released. This is just one of many functions Dapps serve. They work in the way that regular applications would, but they are entirely decentralized and without a centralized control based on one single entity