What Is Defi? | The Basics

Official Definition:

Short for decentralized finance, DeFi is an umbrella term for peer-to-peer financial services on blockchains such as Avalanche or Ethereum.

Why should you care?

DeFi takes the basic premise of digital money and expands on it, creating an entire digital alternative to traditional markets. DeFi is distinct because it expands from simple value transfer to more complex financial use cases.

What are the benefits?

• Open: There is no default KYC (Know Your Customer) required. You can simply get access by connecting your digital wallet.
• Flexible: You can move your assets without asking for permission, avoiding costly transfer fees.
• Fast: Transactions can happen relatively fast compared to traditional finance. These speeds can vary depending on the type of blockchain you are using.
• Transparent: Every transaction is transparently shared on the blockchain that anybody can see — a vast contrast to corporate companies that rarely have that level of transparency.

How does it work?

Typically DeFi is built on dApps (“decentralized apps”) that are simple, easy, and quick to connect with to begin using their protocols.

Here are different types of applications:

• Decentralized exchanges (DEXs): Decentralized exchanges, also known as DEXs, are peer-to-peer marketplaces where users can exchange assets transactions directly.
• Stablecoins: A cryptocurrency whose value is pegged to an asset outside of cryptocurrency (the dollar or euro, for example) to stabilize the price.
• Lending platforms: These platforms use smart contracts to replace intermediaries such as banks that manage lending in the middle.
• Liquidity mining: This involves pooling (staking) your tokens to provide liquidity for exchange. Typically this provides the user with a percentage of the transaction fees as a reward.
• Yield farming: When a protocol provides additional rewards on top of the pool reward as an incentive to provide liquidity or use their product.

Conclusion

DeFi projects have been exploding within the most recent couple of years with many users saying how it has changed their finances and future. The ability for customers to make passive income by using staking, yield farming, or other DeFi applications has greatly increased. If you want to get started with DeFi today, join BooFinance and earn through our different innovative methods.

About Boo Finance

Boo Finance is a DeFi protocol pioneering DeFi 3.0 on the Avalanche Network. We are building innovative yield farming, GameFi, and NFT products. Check out Boo Finance and join our community on Discord, Telegram, and Twitter.