Breaking Down Decentralized Finance (DEFI)

Adrian V
3 min readJan 26, 2024

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DeFi stands for “Decentralized Finance.” Unlike traditional finance, DeFi operates without a central authority.

It’s built on blockchain technology, using smart contracts and cryptography to create a secure, transparent, and accessible financial system.

DeFi is OPEN to anyone, does not require you to trust in an intermediary, and is resistant to censorship.

Before we get started you should know the Key Components of DeFi

  • Blockchain Technology: The backbone of DeFi, ensuring transparency and security.
  • Smart Contracts: Automated contracts that execute when predefined conditions are met.
  • Cryptography: Ensures the security and privacy of transactions.

The Pillars of Decentralized Finance

Stablecoins

Stablecoins are cryptocurrencies whose value is pegged to a stable asset, such as the US dollar.

This pegging mechanism provides stability in value, which is in stark contrast to the typical volatility seen in most cryptocurrencies.

Prominent examples of stablecoins include DAI, Tether (USDT), and USD Coin (USDC). Each of…

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