Concept: June 24, 2021. What is DeFi?

DeFi is short for Decentralized Financing. It is a term that covers all (or most) of the financial activities that one can do with a bank, but in this case they are done peer to peer, without the mediation of a financial institution. Examples of this activities are earn interest, lend, borrow, buy insurance, trade derivatives, trade assets, etc.

The advantages of DeFi are that the activities mentioned above are faster, do not require paperwork, do not require a third party (bank), they are global, private, transparent and decentralized. DeFi truly democratizes finance and makes it accessible to anyone with an internet connection.

There are some disadvantages, for example, Ethereum fees can be high, there is high volatility in the cryptocurrency markets and that very careful records will have to bet kept individually for tax purposes.

In my opinion DeFi is the future of finance, however, more education will be needed and the current financial institutions will fight it tooth and nail.

This post is intended to only raise awareness. In order to make actual financial decisions please contact your financial advisor and/or tax advisor prior to making the decision.

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