What is DeFi (decentralized finance)? How to invest in DeFi? The 3 most common DeFi application platforms
- Linda HamiltonOriginal
- 2025-03-05 17:39:01152browse
Interpretation of DeFi: The Future of Decentralized Finance
This article will explain DeFi (decentralized finance) in an easy-to-understand manner, and explore its operating principles, advantages and investment methods. DeFi uses blockchain technology and smart contracts to bypass traditional financial institutions and achieve more transparent, efficient and low-cost financial services.
What is DeFi?
DeFi, or decentralized finance, is a new financial model based on blockchain and smart contracts. It eliminates dependence on banks, governments or other centralized institutions, making financial services more open and convenient. Anyone can participate through the Internet without being restricted by geographical and identity, and enjoying greater efficiency.
The difference between DeFi and traditional finance:
| 特性 | DeFi | 传统金融 |
|---|---|---|
| 中心化程度 | 完全去中心化 | 高度中心化 |
| 可访问性 | 全球化，无需开户 | 受地域和身份限制 |
| 交易速度 | 近乎实时 | 较慢 |
| 成本 | 较低 | 较高 |
| 透明度 | 高 | 较低 |
How to operate DeFi:
The core of DeFi is the combination of blockchain technology and smart contracts. Blockchain ensures data transparency and immutability, while smart contracts implement automated transactions, such as automatic lending, interest payment, etc., without manual intervention.
The three major application platforms of DeFi:
- Decentralized exchanges (DEX): For example, Uniswap and Sushiswap allow users to trade cryptocurrencies directly on the blockchain without the intervention of centralized exchanges.
- Lending and Lending Platforms: For example, Aave and Compound provide decentralized lending services, and interest rates are dynamically adjusted according to market supply and demand.
- Contract trading platform: For example, dYdX allows users to use leverage to trade cryptocurrency.
How to invest in DeFi?
- Directly invest in DeFi platform tokens: Purchase tokens issued by DeFi platform, but pay attention to their risks and value. Most tokens are governance tokens, and not all project profits are directly reflected in the currency price.
- Provide funds to lend: Deposit funds into lending platforms to earn interest. Usually a certain collateral is required.
- Participate in liquidity mining: Provide assets to DEX's liquidity pool, earning fees and token rewards. It's similar to providing funds for a transaction and gaining money from it.
DeFi is constantly developing, bringing disruptive changes to the traditional financial system. But at the same time, DeFi also has risks, and investors need to carefully evaluate and manage risks well.
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