Decentralized finance (DeFi) is an emerging financial technology that challenges the current centralized banking system. It uses the emerging technology to remove third parties and centralized institutions from financial transactions. The centralized financial institution (central Bank) oversees the monetary system and policy of a nation, easing and tightening the money supply, and setting requirements for the banking industry like the amount of cash reserves the bank must maintain, etc. DeFi challenges this system by empowering individuals with peer-to-peer digital exchanges. DeFi technology has helped in eliminating the fee charged during transactions. Individuals can now hold money in their digital wallet and make transactions any minute as long as the individual has an internet connection.
The goals of DeFi include reducing transaction time and increasing access to financial services. It eliminates the central finance model and gives individuals access to financial services anywhere regardless of one's position or who he is. It gives users control over their finances through a personal wallet. Even though decentralized finance doesn't include the user's name, it is traceable. As technology is advancing, day to day activities are finding roots in the digital space. No longer waiting in the bank or traveling miles to access any financial institution, DeFi can break that chain and allow individuals to do transactions online. Decentralized Finance means the money is not centralized(held by a centralized financial institutions governed by the government of a nation). DeFi allows one in the comfort of their room to transfer funds, swap tokens, and perform any financial transaction with low charges. DeFi uses the Blockchain technology that cryptocurrencies use.
-peer-to-peer: peer-to-peer transaction is where two parties agree to exchange cryptocurrencies for services or goods. Payments from peer-to-peer are made through decentralized apps. Peer-to-peer is one of the core use of DeFi
-Low fee and high interest rate: DeFi allows negotiation between parties and lend money.
-Accessibility:Anyone with a smartphone and internet connection can access decentralized finance anywhere and at any time.
-Security: Blockchain are immutable, they cannot be changed. The smart contracts published on the Blockchain are available for everyone to review but do not reveal one's identity.
-Individuals have autonomy over their wallet and are not controlled by a central authority.