Thread by @iamchrisani

UNDERSTANDING DEFI WITH
CHRIS ANI
(A Series)
OUTLINE:
- Intro
- What is CeFi & DeFi
- The Pillars/Components of DeFi
- Advantages and Disadvantages of DeFi
- How to Make Money with DeFi
#DeFiwithChrisAni

Are we ready ?
Let's Go
A thread

Introduction here

https://twitter.com/iamchrisani/status/1481638051348504578?t=uUpViqP8fjjXg-ZKKqXnyA&s=19

What is CeFi & DeFi ?
To get a full understanding of what CeFi and DeFi is, one needs to understand what makes
up a financial system.
A financial system is made up of various services like money transfers (sending money to
one another), loans, saving plans, insurance,

and markets (trades) e.t.c.
Today, this system and all its services are completely centralised. There is always an
authority (a company or a person) that controls and offers these services.
Centralised Finance (CeFi) was the standard for trading cryptos.

In CeFi, all trade orders
and funds were handled by a centralised exchange - the central authority. You don’t own
your cryptocurrencies when buying/selling through a centralised exchange. Also, you are
subject to the rules set by the exchange.

Decentralised Finance (DeFi) is a term used to refer to blockchain applications that aim to
remove middlemen from all financial transactions - banks, brokerages or centralised
exchanges.
Every DeFi protocol has three building blocks it relies on to make it work:

1. Cryptography - A technique used to send secure messages between two or more
participants. This guarantees the security of the transactions and the participants,
independent of operations from a central authority.

2. Blockchain - A system of recording information in a way that makes it difficult or
impossible to change, hack, or cheat the system. At the moment, most of the DeFi
projects are built on the Ethereum blockchain.

3. Smart Contracts - An agreement between two people in the form of computer code.
They run on the blockchain, so they are stored on a public database and cannot be
changed. Smart contracts are the building blocks of DeFi.

These blocks ensure that these financial services are efficient, secure and free of any central
authority.

Let me know if you got value with this before we go to the next part of the series which is Pillars and components of Defi
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