July 4, 2022

How to DeFi

DeFi is financial instruments in the form of blockchain-based services and applications. The main goal of decentralized finance is to become an alternative to the banking sector and replace traditional technologies of the current financial system with open-source protocols.

In the DeFi environment, one does not have to go through KYC to trade cryptocurrency, one does not have to prove one's solvency to take a loan, and one does not have to disclose one's identity for any transactions.

What is included in this concept?

Networks
Blockchain networks are the backbone of decentralized finance. Level 1 networks (Ethereum, BSC, Solana) are used to build the main projects, which will be discussed below. The second level networks fix the drawbacks of L1 networks.

Wallets
Cryptocurrencies are the entry point to DeFi. This is where crypto is stored and transfers are made.

Coins and tokens
Every project has its own "crypto". Networks have coins. Projects on these networks have tokens.

NFT
Where would one go without those expensive pictures? Yes, they're part of DeFi, too.

Dapps
Decentralized applications (Dapps) are blockchain-based applications. Such applications are based on smart contracts.

What else is in DeFi?


DEX (Decentralized exchange) is a decentralized platform that allows exchanging cryptocurrencies without an intermediary in the form of an exchange. It consists of a system of smart contracts.

DeFi Lending - protocols that provide the ability to take "credit" in one cryptocurrency against another without any intermediaries. A very convenient feature to get the cryptocurrency you need without selling the one you already have.

DAO - translated as Decentralized Autonomous Organization. A DAO is a specific form of organization in which coordination of activities between participants is performed without centralized management, but with the use of automatic algorithms and smart contracts.

Crosschain bridges are decentralized applications that allow the transfer of assets between different blockchains.

P2E - games, performing tasks in which you earn project tokens, which you can then sell.

Meta universes are virtual spaces where people can interact with each other. Often uses NFT technology to create unique user avatars.

In the following articles, we will examine each element in detail