DeFi is short for “decentralized finance,” DeFi technology is an umbrella term for various financial applications in cryptocurrency or blockchain geared toward disrupting financial intermediaries.

DeFi technology draws inspiration from blockchain, the technology behind the digital currency, which allows several entities to hold a copy of a history of transactions, meaning it isn’t controlled by a single, central source.

That’s important because centralized systems and human gatekeepers can limit the speed and sophistication of transactions while offering users less direct control over their money.

Avid crypto investors has also ported to fund most DeFi tech startups and there are actively lots of DeFi startups project pioneering the technology and making it one of the crypto community choice. Due to extensive solution, it brings more than blockchain technology.

DeFi technology is distinct because it expands the use of blockchain from simple value transfer to more complex financial use cases. Bitcoin and many other digital-native assets stand out from legacy digital payment methods, such as those run by Visa and PayPal, in that they remove all middlemen from transactions.

When you pay with a credit card for coffee at a cafe, a financial institution sits between you and the business. With control over the transaction, retaining the authority to stop or pause it and record it in its private ledger. With bitcoin, those institutions are cut out of the picture.

Direct purchases aren’t the only type of transaction or contract overseen by big companies; financial applications such as loans, insurance, crowdfunding, derivatives, betting, and more are also in their control. Cutting out middlemen from all kinds of transactions is one of the primary advantages of DeFi technology and that explains more reason it gained popularity and accepted within crypto community and investors. Before it was commonly known as decentralized finance, the idea of DeFi was often called “open finance.”

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