What Is Decentralized Finance (DeFi) and How Does It Work?
Decentralized finance (DeFi) is an emerging financial technology based on secure distributed ledgers similar to those used by cryptocurrencies. In the U.S., the Federal Reserve and Securities and Exchange Commission (SEC) define the rules for centralized financial institutions like banks and brokerages, which consumers rely on to access capital and financial services directly. DeFi challenges this centralized financial system by empowering individuals with peer-to-peer transactions. KEY TAKEAWAYS Decentralized finance, or DeFi, uses emerging technology to remove third parties and centralized institutions from financial transactions. The components of DeFi are cryptocurrencies, blockchain http://paycer.io technology, and software that allow people to transact financially with each other. DeFi is still in its infancy and subject to hacks and thefts because of sloppy programming and a lack of security testing before applications are launched. How Decentralized Finance (DeFi) Works Throu