What is DeFi?

An ordinary user of the Binance exchange or a beginner may not even know about the existence of DeFi. But this is a very important component of the whole crypt that you need to know and be able to use.

I think the same newbie heard about decentralization quite often. The fact that the crypto is decentralized, but at the same time trading on Binance, he does not even understand that at this stage there is only centralization.

It's time for us to understand a little bit about crypto terminology. What does the term centralization mean? Centralization is when something or someone is at the mercy of one body. This can be any example, for example, a company with a staff of 100 employees is in the hands of one, most often a group of managers. These managers can decide how much their employees will receive, who to fire, where to keep the development vector, and so on. That is, all the decisions and money that employees will receive are in the hands of several people.

Whereas decentralization means there is no intermediary between salary and employee. That is, there is no third link - managers. So we can understand that centralization is a three-way relationship and decentralization is a two-way relationship. But I agree that if an employee pays himself a salary, then this salary will be many millions per hour, this is how he will evaluate it. Therefore, there must be some kind of limiter for this. In crypto, this constraint is a smart contract. In which all the rules and conditions that the user must comply with are spelled out, but this smart contract does not interact with the employee’s salary in any way, but only limits the employee’s impossible actions.

Now we come to the main one. What is DeFi.

In order to use DeFi you need to have your own wallet. You can use many different variations by also choosing the blockchain you are interested in. But I will consider for example the Ethereum blockchain, for it, you can choose the most popular option - MetaMask. When creating it, you need to save a seed phrase consisting of 12 or 24 words, the loss of this phrase will mean the loss of the entire wallet, so I recommend saving it in a very safe place.

After that, you can replenish your wallet with any amount in any coin. And you can start popular dApps built on the blockchain. In the case of Ethereum, these are Uniswap, Ribbon, Compound, Aave, and so on.

You can track all transactions in the blockchain explorer, each one is different. For example, for Ethereum, this is Etherscan. There you can track not only transactions, but also which coins are on the wallet, from where they were sent, the status of the transaction and other technical details. I advise you to take a look at this.

That is, to sum up, you can use banking services without identification, since the wallet does not require any data about users. And even expand their capabilities with the help of DeFi. I think that after this article, it has become more clear to you what DeFi is, why decentralization is important, and what is behind it. I advise you to read more information in the book from CoinGecko about DeFi.