DeFi meaning stands for “decentralized finance” and refers to the ecosystem of financial applications that are being developed based on blockchain systems.
DeFi may be defined as the movement that encourages the use of decentralized networks and open source software to create multiple types of financial services and products. The idea is to develop and operate financial DApps on top of a transparent and trustless framework with no centralisation, such as permissionless blockchains and other peer-to-peer (P2P) protocols.
As of right now, the largest functions of DeFi are creating monetary banking services, providing peer-to-peer or pooled lending and borrowing platforms, and enabling advanced financial instruments such as DEX.
Within those three fields, there are other types of DeFi services. Some examples of products and use cases include funding protocols, software development tools, index construction, subscription payment protocols, and data analysis applications. DeFi dApps may also be used for KYC, AML, and other identity management services.
As a whole, decentralized finance brings numerous benefits as compared to traditional financial services. Through the use of smart contracts and distributed systems, deploying a financial application or product becomes much less complex and secure. For example, numerous dApps are being developed on top of the ETHereum blockchain, which provides reduced operational costs and lower entry barriers.
In conclusion, DeFi meaning is “decentralized finance”, and it is a technological advancement from traditional finance that boasts increased transparency and security.
