You may have heard of DeFi (Decentralized Finance): decentralized finance. But what exactly is it? And what are its characteristics?

This reduces costs and increases the speed and fluidity of the financial system. What's more, DeFi is open to everyone, regardless of age, origin or wealth, as it is accessible to anyone with an Internet connection.

This alternative option is made possible by tools like blockchain, so technology becomes the trusted third party in this system.

DeFi features:

DeFi operates mainly on the Ethereum protocol, using decentralized protocols and applications known as dApps.

These protocols are open source and cannot be modified by a central authority.

Once the code is protected by decentralization, it uses smart contracts (small, fully automated programs) to establish complex, irreversible agreements between different people.

The system is resilient, transparent and accessible, as well as interoperable with other smart contracts and decentralized applications.

Examples of use :

Borrowing in a decentralized way: granting unconditional loans is not an option, which is why the protocols use the collateral principle. For every sum borrowed in crypto-assets, 1.5 times the amount borrowed must be pledged as collateral, also in crypto-assets.

This makes it possible to invest in crypto-assets over the long term and then use this value by "locking it up" as collateral to obtain a smaller loan. The borrowed value can be used for a second investment, or it can be injected into the traditional economy. To unlock the "collateral", you'll need to repay your loan, of course, as well as any fees. You can close your loan at any time.

Decentralized lending: if you have crypto-assets and want to put them to work for a small extra return, you can deposit them in a "liquidity pool". This pool brings together the crypto-assets of all lenders and authorizes borrowers to access the liquidity after their collateral has been locked.

The liquidity pool therefore generates fees that are paid by borrowers and feed into lenders' returns!

The cryptoasset lender can withdraw these funds at any time with interest.

Borrowing and lending can be done in stablecoin and/or volatile crypto-assets.