Thread by @FiftySatFinance

Over $180 billion has been deposited into DeFi and that number continues to grow.

WTF is DeFi?

Here's a simple breakdown of…

• What it is
• How it works
• Why it matters

[ THREAD ]

1. What is DeFi?

Decentralized Finance (DeFi) is a new financial system built using blockchain.

You can do all the same things like

• Trade
• Gamble
• Borrow money
• Buy insurance

But there's no single person or company in charge.

2. How Does DeFi Work?

Most DeFi apps are built on Ethereum.

Ethereum is a decentralized blockchain network.

The network is hosted by people sharing their computing power from around the world.

No single person or company has control of the network and apps built on it.

DeFi apps use Ethereum to run smart contracts.

A smart contract is an agreement programmed into code.

Smart contracts are

• Automated
• Irreversible
• Transparent
• Tamper-proof

Smart contracts remove human intervention from agreements.

Example:

Augur is a decentralized betting app.

All bets are automatically processed by smart contracts.

No one can

• Cheat
• Change the rules
• Reverse a win and take your money away

Not even Augur’s team.

3. Why is DeFi Needed?

Let's say you bank with Chase.

Chase has complete control over its platform.

Chase can

• Deny you a loan
• Delete your account
• Freeze your account

They can stop you from using your money like how Robinhood restricted trading.

And I know we all love how Chase and other banks

• Have hidden fees
• Take all the profits
• Take days to transfer money

This current financial system ain't it chief.

"I chase the bank, I don't bank with Chase"

— Lil Wayne

By using blockchain and smart contracts, we can create a financial system that’s

• Immutable
• Transparent
• Permissionless

Immutable:

Agreements can't be changed or broken.

All transactions go on a permanent record.

No single person or company can delete or change transactions.

Transparent:

All transactions and software code can be publicly viewed.

Anyone can look up all transaction history on the blockchain.

Anyone can look at the app's code to see

• How it works
• If there are any bugs
• If the app will do what it's supposed to

Permissionless:

Anyone can use DeFi apps.

There are no approval processes or background checks.

It doesn't matter

• What your income is
• What your credit score is
• How much money you make

All you need is an internet connection and a crypto wallet.

No one can stop you from using your money.

You can access your money anywhere, anytime.

No more waiting for business hours.

DeFi runs 24/7/365.

4. Why Does DeFi Matter?

DeFi solves huge issues that the current system has like

• Lack of transparency
• Discrimination
• Limited financial access

Lack of Transparency:

Modern banking is a black box.

Banks are always doing shady shit.

Now there's a permanent record that anyone can see and verify.

Discrimination:

Banks racially discriminate people by

• Denying loans
• Charging higher fees
• Charging higher interest rates

Even if they have the right qualifications.

DeFi apps don't care about

• Where you live
• What race you are
• What language you speak

There's nobody to deny you a loan or charge a higher fee based on who you are.

Limited Financial Access:

There are nearly 2 billion unbanked people in the world.

They lack financial access because they

• Live too far away from a bank
• Don't trust the system
• Don't have the necessary documents

DeFi is an open system that anyone can use.

Someone in a developing country can

• Invest
• Get a loan
• Buy insurance

All right from their phone.

DeFi provides financial inclusion to the world.

Want to learn more?

A great resource is letsdodefi.com created by @thekriskay.

The best way to learn about DeFi is to use some apps.

Some apps to check out are

• SushiSwap — Trading
• Aave — Borrowing and lending
• PoolTogether — Savings lottery

We'll cover these in-depth next time.

Thanks for reading!

If you got value from this thread then

• RT the first tweet to help others
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Peace ✌🏼

https://twitter.com/FiftySatFinance/status/1438132977699987460