What is Decentralized Finance (DeFi)?

  • Stablecoins. A building block of decentralized finance. Unlike cryptocurrencies such as Bitcoin or Ethereum that are known for their price volatility, a stablecoin is engineered to remain “stable” at exactly 1.00 units of fiat. Most stablecoins are pegged to the USD, but some are in other fiat currencies like the Chinese RMB.
  • Decentralized lending. Programmatically take out a loan on the blockchain. No bank account is required.
  • Decentralized exchanges. Buy and sell cryptocurrencies through a blockchain, rather than a centralized exchange like Coinbase. In principle, a machine can trade on it!
  • Collateralization. Provide digital assets to collateralize your decentralized loans, providing the lender some recourse in the event of default.
  • Decentralized Identity. Identities are used in the context of smart contracts for things like assessing your creditworthiness for a decentralized loan.
  • Composability. Snapping together DeFi functions that make different things, much like software libraries. For example, if a contract takes in crypto and generates interest, the second contract could automatically reinvest that interest.
  • Risk management. High returns in DeFi are often accompanied by even higher risks. Fortunately, new tools are arising to help to hedge these risks.




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