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DeFi or decentralized finance is a new financial system that is operated directly through blockchain technology, without relying on any central authority or bank. It is a system that creates opportunities for people to borrow, save, or trade without banks.

What is DeFi and its functions

DeFi is a type of financial platform built on blockchain. It eliminates the role of intermediaries in the traditional financial system (such as banks, brokerage firms). The main goal of DeFi is to make financial services accessible, open, and transparent to everyone. DeFi's operations are mainly based on smart contracts, which are created on Ethereum and other blockchain platforms. These smart contracts automatically execute transactions and various conditions, which are completed without human intervention.

Advantages of DeFi

DeFi offers several advantages over the traditional financial system, which make it more attractive

Transparency and accessibility : Every transaction in DeFi is recorded on the blockchain, which is open to everyone. As a result, financial transactions are more transparent. In addition, anyone from anywhere in the world can use DeFi services through an internet connection.

Low costs : In the traditional financial system, banks or other institutions have to pay high fees for borrowing, saving or trading. DeFi eliminates these intermediaries, which greatly reduces costs.

Fast and easy transactions : Transactions are completed quickly using smart contracts. There is no need for any complicated paperwork or lengthy verification process to borrow or save money.

Risks and Challenges

While DeFi offers many benefits, it also has some risks and challenges

Cybersecurity Risks : If there are coding errors (bugs) in smart contracts, hackers can exploit them and steal users’ funds.

Lack of Control : Since DeFi is a decentralized system, there is no government or central control over it. While this offers freedom on the one hand, it can also increase the risk of illegal activities.

Volatility : Most of the assets in DeFi are cryptocurrency-based, the value of which fluctuates very rapidly. This volatility can pose a major risk to investors.

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Conclusion

DeFi is still in its early stages, but it has a lot of potential. It can make our financial system more inclusive and simpler in the future. Today's discussion concludes here. I hope you've found it interesting. Please share your thoughts on today's topic. Prayers for everyone. May everyone be well. Amen.

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