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What is DeFi and How Does it Work? DeFi Explained

What is DeFi?

Decentralised finance, commonly known as ‘DeFi’, is the term used to describe a blockchain-based financial services system that removes the need for transactions to be approved by government agencies. In simpler terms, the DeFi is like a blockchain financial institution or banking system where you can trade digital assets or cryptocurrencies without transaction costs from institutions like the central banks.

The Defi is also a free, open-source digital marketplace that enables users who code to innovate and develop their own decentralised apps (dApps). Defi platforms offer payment services, trades and investments, loans, insurance and asset management.1 While DeFi may seem appealing and beneficial to the user, there are some associated risks.

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