What is Decentralized Finance (DeFi)? A Beginner’s Guide
DeFi, or Decentralized Finance, provides an alternative to traditional banking by eliminating intermediaries and giving users full control over their assets. This guide explains how DeFi works and its role in transforming payment systems. What Is a Decentralized Payment System? Decentralized payment systems, built on blockchain technology, enable direct transactions between users without banks or financial institutions. Smart contracts ensure security and transparency, while shared ledgers eliminate third-party oversight. This innovation speeds up payments, lowers costs, and enables borderless transactions, reshaping global finance. Ethereum exemplifies a decentralized payment ecosystem, supporting not only currency transfers but also advanced financial applications through programmable smart contracts. Unlike centralized systems, decentralized networks distribute control across nodes, ensuring reliability by eliminating single points of failure. For example, sending Bitcoin or other cryptocurrencies via a decentralized network involves verification by blockchain participants, bypassing central authorities. This reduces delays, cuts intermediary costs, and speeds up transactions. Global…