Introducing DeFi 101 (Or ‘Everything You Need To Know About Decentralised Finance’)

When you tell someone they can get upwards of 7% APY on their savings thanks to blockchain technology, they typically respond in one of two ways.

‘That’s more like it,’ they say — or, ‘That’s a scam.’

More often than not, the first group are those who’ve been in crypto for at least a few years. They’ve watched the industry evolve. They’ve seen (even fallen victim to) a scam or two, yet they’ve also witnessed groundbreaking products brought to life.

They understand that generating 7% APY isn’t just possible when using the blockchain correctly — it’s pretty much the norm.

On the other side, we have those who steer clear of crypto altogether, mainly because the media likes to focus on the hacks and scams. As a result, anything that looks too good to be true (at least, by traditional standards) is met with scepticism.

And that’s why we’re writing this new ‘DeFi 101’ series. We want as many people as possible to see that earning 7% APY is far from a scam; it’s what you should expect.

Let’s kick things off by answering the big question.

What is decentralised finance?

Decentralised finance (DeFi, for short) is a financial ecosystem that runs on blockchain technology. 

Think lending, borrowing, and trading services, powered exclusively by computer code. The setup allows people like you and me to access financial services or buy and sell assets without relying on banks, traditional exchanges, or other intermediaries. 

The fact that these services run on the blockchain significantly reduces their costs. And that’s how a DeFi-powered platform can offer 7% APY on your savings.

What is an example of decentralised finance?

If you’ve ever heard of stablecoins, decentralised exchanges (DEx’s), or collateralized lending protocols, you’ve heard of decentralised finance.

In this DeFi 101 series, you’ll meet a cross-section of the most successful, proven DeFi applications, including stablecoins like USDC, lending protocols like Aave and Compound, and DEx’s like Pancake Swap.

And as you make your way through each article, you’ll not only build your understanding of how the ecosystem works.

You’ll start to see the benefits of DeFi, including the ones in the next section.

Four big benefits of decentralised finance

The main benefit of DeFi is that it’s peer-to-peer, reducing (even eliminating) any reliance on a human intermediary.

A combination of security protocols, blockchain applications, and hardware ensures that the decentralised services capture all the qualities of centralised services. And the built-in decentralisation opens up several other advantages.

These include:

• Complete control: only you can access your funds
• Round-the-clock services: you can use every application 24-7
• Open access: you can lend, borrow and trade with just an internet connection
• Ultimate security: the infrastructure is inherently secure

The simplest way to illustrate the benefits of DeFi is through a simple scenario. Suppose you want to transfer money to a family member in another country on a Sunday.

If you do this through your bank, the money will take days to arrive, and you’ll pay high fees for the service. But if you send the money via a decentralised application, the funds will hit the recipient’s account in seconds.

And it’ll cost you pennies on the dollar.

Join us every Wednesday for DeFi 101

Today’s post is just an introduction to what’s to come.

From here on out, we’ll share a new article every Wednesday covering essential topics from the decentralised finance ecosystem.

Next Wednesday, we’ll answer the all-important question, ‘What is a stablecoin?’ We’ll then run through themes like the most relevant stablecoins, the most reliable DeFi protocols, and the meaning of standard DeFi terms.

Join us next week for the first official post in the DeFi 101 series. In the meantime, if you want to stay up to date with the latest DeFi news.

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