How did DeFi start?

DeFi seeks to develop small traditional financial pieces but with an extra degree of transparency and decentralization. These small pieces, as if they were Lego pieces, can be combined with each other, in order to develop an entire ecosystem of small solutions that together form a great solution for finance that invalidates the need for centralized and opaque financial financial institutions that they no longer add value.

That is the idea that has driven the creation of the term “DeFi”, and the one that has led its evolution to the current point. In fact, it is currently impossible to ignore the huge impact that DeFi has on the crypto world. For that reason, we open a space to learn what DeFi is and how this idea is changing the global financial world.

DeFi, the idea that is changing the financial Uniswap clone world

Imagine a world where anyone could create transparent, fair and efficient financial products, causing banks, large finance companies, lenders and insurance companies to recede into the background, or better yet, become completely unnecessary and disappear. But also a world where anyone can interact with these products freely.

Well, this is what DeFi is. That is to say, it wants to convert the centralized finance structures that we have now, into decentralized structures, without trusted third parties, executed on smart contracts or intelligent contracts , within a blockchain where a written and unalterable record of each action carried out is transparently reflected. .

The impact of a trend like this is gigantic. We are barely in its early years and already the creativity of the world community is shaping alternative versions of almost all existing financial products.

Imagine that you need to obtain a loan to undertake. Instead of going to a bank, you can go to a DeFi platform and apply for a loan. Said loan has conditions (saving the technicalities) that are quite clear and transparent. All this thanks to the fact that said loan will be controlled by a public and immutable smart contract .

Not only that, all the actions carried out on the platforms are visible and immutably recorded on the blockchain as well. Perhaps you do not have the knowledge to verify the reliability of the DeFi service, Uniswap clone script but due to its transparency feature, thousands of eyes will be able to analyze and question it, warning of its malfunction if so. And in the future, given the impact of this technology, children will surely be taught to read transparent smart contracts in school.

Thanks to DeFi, you will not need to be banked, you will not need to carry dozens of papers, stand in line to deliver them and wait weeks for a response. Instead, from the comfort of your sofa, with your smartphone you can do the whole process receiving the money in your possession.

However, DeFi can be much more, it can be the vehicle for the economy and finances of this increasingly present world that, with the help of Blockchain technology, begins to decentralize. The vehicle that opens the doors to international investments without so much bureaucracy, costs and time and with higher levels of trust and transparency. A vehicle for unbanked people to access services without the dictatorships of the banks, having the same conditions to personally evolve in their development.

Do you know what Decentralized Finance or DeFi is? — EducaBlock

Origin of DeFi

If you are one of those who think that DeFi originated with the birth of Bitcoin, you are right, Bitcoin is definitely the first DeFi platform in the world. But the origin of the idea is much older.

Nick Szabo was pointing, perhaps without knowing it, to the birth of DeFi when he presented his idea of smart contracts in the year 1995. That is 13 years before the creation of Bitcoin, an idea certainly ahead of its time.

However, it was not until the arrival of Ethereum in 2014 that this idea was radically changed. Ethereum and its smart contracts allowed developers to create anything they could imagine on top of a blockchain. And precisely that what started as an experiment is now becoming a movement in its own right, in a decentralized financial ecosystem that operates billions of dollars every month.

An ecosystem that during the years 2018 and 2019 maintained constant development, and during the first months of 2020 it has had unprecedented growth. It has even reached the point that it has revalued blockchain projects by allowing the creation of bridges between traditional finance and cryptocurrencies.

Thanks to that work we can now count on liquidity markets, lending systems and decentralized exchanges (DEX) , all this being just the beginning.

DeFi Characteristics

Now that we know the concept, its origins and the differences between digital financial models, let’s know what the characteristics of DeFi are.

They work based on blockchain technology and smart contracts .

They are very safe . This is thanks to the fact that they use powerful cryptographic techniques to ensure that the platform, access and use thereof can only be carried out by authorized persons.

They have high levels of decentralization. The greatest potential of DeFi is its high level of decentralization. In other words, they have the capacity to act without the need for a bureaucratic chain to prevail over the functions of the platform.

No trust in third parties. This means that action on a platform is direct between the user and the platform itself. Trusted third parties are unnecessary because that task will be performed by the blockchain. It is this structure that will keep track of everything securely and immutably.

Transparent. Another great feature of DeFi is its transparency. Being built on free software, each line of platform code is auditable. the mobilization of resources is auditable, because they all take place on the blockchain.

Without Borders. Access to a DeFi platform has no borders. You can be in any country in the world and access its services without problems.

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