Decentralized finance protocols have seen an explosion in popularity in recent months.
- Decentralized finance (or DeFi for short) consists of an ecosystem of automated financial applications built on cryptocurrency blockchains.
- These applications offer the same services as legacy financial institutions such as lending, borrowing, and saving.
- The difference is that there is no "middle man", allowing participating users to capitalize on much higher interest rates on their savings and lent assets.
- Users can also borrow cryptocurrency in a trustless manner (no ID or credit checks required).
- Although DeFi applications carry some degree of risk, many have been rigorously audited to protect users from losing their funds.
- Most applications also allow users to withdraw their assets at any time without penalty.
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