What is DeFi and why it is so exciting?

Blockchain and cryptocurrencies laid the foundation of the concept of democratic global economy, but it’s DeFi (Decentralized Finance) that is going to take us there.

DeFi, formerly known as Open Finance, was inspired by Blockchain, the technology behind the digital currency Bitcoin, which enables multiple entities to retain a copy of a history of transactions, which means that it isn’t controlled by one central source.

Bitcoin and numerous other digital assets stand out from digital payment methods legacy, such as those managed by Visa and PayPal. When you pay by credit card, a financial institution is between you and the business and has control over every transaction. With DeFi those institutions are out of the game. Cutting off intermediaries for all sorts of transactions is one of the main advantages of DeFi.

DeFi already offers a range of financial instruments and marketplaces which guarantees that the individual is the only caretaker of his digital assets. This is now possible on smart contract Blockchains, like Ethereum. The majority of DeFi programs so called decentralized apps, or DApps use Ethereum and can be considered as applications which are built on decentralized technology, rather than being built and controlled by a single source. Many DApps which are live already, can be used by anyone with a device and internet connection.

The use of DApps mentioned above, allows users to generate passive income, which means that investors and crypto holders may earn income from cryptos which are kept but are not being actively traded, in other words DeFi world offers to generate a steady income stream. Passive income is a key factor because the DeFi world is innovating towards even greater automation.

DeFi is now one of the fastest growing sectors, the growth of DeFi in 2020 was such that many call 2020 to be the year of DeFi. The xDAO team believes that 2021 has lots of exciting stuff for DeFi and DeFi enthusiasts.

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