What is DeFi ?
Peer to peer (P2P)
DeFi stands for decentralized finance, which eliminates intermediaries buyers by allowing everyone through DeFi technology.
DeFi refers to peer-to-peer financial networks on public blockchain (often to use Ethereum blockchain ). The transaction is where two parties agree to exchange cryptocurrency for goods or services with a third party involved. DeFi uses security protocols, connectivity, software, and hardware advancements. Decentralized finance uses the blockchain technology that cryptocurrencies use. A blockchain is a distributed and secured database or ledger. Applications called dApps are used to handle transactions and run the blockchain.
You can trade from anywhere, If you have an internet connection, by using software that confirms and records financial operations in distributed financial databases. A distributed database is accessible across various locations, it aggregates data from all users by using a consensus mechanism to verify it.
Peer to peer lending (P2P lending)
In DeFi, you’d use your decentralized finance application (dApp) to enter your loan needs, and an algorithm would match you up with peers that meet your needs. You’d then need to agree to one of the lender’s terms and receive your loan.
You receive your loan after the consensus mechanism verifies it. Then, the lender can begin collecting payments from you at the agreed-upon intervals. When you make a payment via your dApp, it follows the same process in the blockchain; then, the funds are transferred to the lender
Centralized Finance: You’d need to go to your bank or another lender, so you can’t do the transaction everywhere you want (not the same as DeFi).
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