Module 1: What is DeFi?

In this module, you will learn about decentralized finance (DeFi) and its distinctions from traditional financial institutions. Additionally, you will explore the domains in which DeFi projects currently compete with their centralized counterparts.

Summary

Decentralized Finance (DeFi) is an ecosystem of online projects based on blockchains and smart contracts, encompassing various financial instruments. The concept behind them is to create an alternative built on principles of decentralization and governed by a large number of users.

Already, there are areas where DeFi projects can compete with centralized entities. For example, decentralized exchanges allow the trading of cryptocurrencies without transferring coins to the platform's wallets, operating based on automated market makers.

Another promising aspect of DeFi is lending. Although the platform knows nothing about the borrower, crypto loans are always issued with collateral, often in the form of another cryptocurrency. Therefore, lenders can be confident that they will receive the borrowed funds from the user or from the sale of the collateral.