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Ever since late 2019 and early 2020 DeFi has been the hot “buzz word” for cryptocurrency. What makes DeFi special? And why was it invented in the first place?
Bitcoin the first decentralized internet money
Bitcoin is the first decentralized cryptocurrency and allows users to send value to each other in a peer to peer system. For peer to peer payment Bitcoin worked quite well but it has a limited smart contract system that can’t take care of loans, exchanging tokens, and other important services. To make up for Bitcoin’s limitations centralized services were put in place. Some have served their customers quite well (like OKEx) while others like Mount Gox caused customers to lose a lot of Bitcoin.
Ethereum and smart contracts
In 2013 Vitalik Buterin launched the Ethereum white paper and two years later launched the network. Ethereum is made for flexibility and running the sorts of smart contracts that Bitcoin can’t do. Over the course of several years Ethereum developed its code and eco system and gradually what we call DeFi emerged.
DeFi products and services
Once complicated smart contracts could be ran on blockchains it opened up a wide world of possibilities. This includes:
- Decentralized exchanges that allow you trading of tokens without centralized services like Uniswap.
- Lending services like Compound.
- Stablecoins like Maker DAO
- Wrapped coins that don’t natively exist on a blockchain like Wrapped Bitcoin.
- And many other financial services
All of this allows cryptocurrency finance to take place with the security that decentralization provides.
Future DeFi
In the future, I suspect that DeFi will grow on other blockchains that can scale better than Ethereum. The OKEx Chain is already getting its system together to become a new decentralized trading platform that runs on its own blockchain. It will be much faster and more efficient than Ethereum which will provide a better trading experience for cryptocurrency users.
Why DeFi was originally published in OKEx Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
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