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So, what is DeFi? And why is it skyrocketing in popularity at the moment? Let’s take a quick look into some of the most important aspects of DeFi.
What is DeFi in terms of crypto?
The concept of decentralized finance works hand in hand with cryptocurrency, NFTs and similar digital assets, so it shouldn’t be much of a surprise that most DeFi apps are crypto-based.
There are many DeFi applications, websites and tools that are built on blockchain technology (typically the Ethereum one), just like cryptocurrency. This makes it much easier to create a secure public ledger for transactions, as well as digital investments, all the while cutting out any third parties and potentially speeding up transactions and lowering fees in the process.
Thanks to the smart contracts that these applications use, it’s often possible to make a broad range of transactions, so you’re generally not going to be limited to just Bitcoin trading. You can even invest in DeFi apps and potentially receive a profit in the future if the application takes off.
Why is DeFi so popular right now?
If you’re a part of the crypto scene, there’s a good chance that you’ve heard people talking about decentralized finance. One of the most prominent reasons why it’s gaining more interest is simply because of how it complements the blockchain and benefits the goal of crypto (to create a decentralized financial future). DeFi apps are simply the next step in making this a reality.
In the last few years, the concept of decentralized finance has become more attractive, with its ability to process more complex financial transactions, reduce fees and significantly increase processing times. Overall, there are a whole host of factors that have helped DeFi projects to rise in popularity.
Is DeFi worth investing in?
With how promising DeFi seems, it shouldn’t come as much of a surprise that several decentralized finance projects are beginning to gain traction in a range of niches. In most cases, one of the challenges that you’ll face as an investor is choosing the right application for your needs, as there are several options out there and not all of them are going to prove to be successful.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.