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Decentralized Finance (DeFi) refers to a financial system built on blockchain technology that allows for peer-to-peer transactions without intermediaries like banks or traditional financial institutions. In a DeFi system, financial transactions are executed through smart contracts and decentralized applications (dapps) that run on a blockchain network.
DeFi has several key features, including transparency, immutability, security, and accessibility. Transactions are transparent and can be viewed by anyone on the blockchain network, making it difficult to manipulate or falsify data. Smart contracts are self-executing and automate the process of verifying and executing transactions, which reduces the need for intermediaries and ensures that transactions are executed as intended.
Some of the most popular applications of DeFi include cryptocurrency exchanges, lending platforms, and stable tokens. Cryptocurrency exchanges allow users to trade one cryptocurrency for another without the need for a centralized authority, while lending platforms allow users to lend and borrow digital assets without the need for a traditional bank. Stable tokens are digital currencies that are pegged to a stable asset, such as the US dollar, and are used to minimize price volatility in the cryptocurrency market.
Overall, DeFi is an emerging field that has the potential to revolutionize the traditional financial system by creating a more open, transparent, and accessible financial system for everyone.