Decentralized finance is an umbrella term for a host of activities that cut the middleman out of traditional financial services like banking. It encompasses loans, interest-earning accounts, money transfers, insurance, and cryptocurrency exchanges. For example, I might lend you $100 worth of Bitcoin (BTC) via DeFi, and I’d then earn interest on that loan — without involving a traditional lender.
When Bitcoin first launched, one of the amazing things about it was its decentralized nature. Previously, digital money required the backing of a third party — whether a bank or government — to validate transactions and guarantee payments. The same blockchain technology that powers Bitcoin is what enables the decentralized finance industry to cut out intermediaries.
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