First and foremost what defines DeFi, aka Decentralized Finance?
By now you’ve probably heard of bitcoin, the pioneering cryptocurrency that was once used only by techies, and is now a household name. For newcomers, understanding Bitcoin, or any other Cryptocurrency, can be compared to reading a book in a foreign language without ever having heard that language before.
The link between bitcoin and other cryptocurrencies together is the formation of smart-contracts that serve as irreversible agreements of payments or transfers. With smart-contracts, once a transaction is made it cannot be reversed, and it becomes part of a public ledger that can be verified by anyone, anywhere(Though there are certain cryptocurrencies that work to hide these transactions, for the purpose of this article we won’t be discussing those).
Using smart-contracts, a person can send funds to someone around the world rather instantly, for a fraction of the cost of a traditional transfer, and without the use of middle men as is needed in traditional finance. The decentralized aspect of DeFi, is what allows these cryptocurrencies to exist without the worry of one person or institution deciding to disrupt these exchanges of funds.
For example, with centralized currencies such as the dollar, If the US government told the world that $1 bills will no longer be accepted as currency, the world would have no choice to accept this course of action and would stop accepting $1 dollar bills. With Decentralized Cryptocurrencies this cannot happen because the power is not held by a central authority. For decentralized currencies to be taken out of circulation, one would need to obtain the entire controlling stake, 100% of the currency.
Defi is ‘permissionless,’ and anyone with an uninhibited internet connection can interact with smart contracts using their crypto wallets without the need to spend precious time filling out forms or dealing with middlemen. These permissionless smart-contracts are revolutionary however they do not come without risk as they are also susceptible to bad actors and errors in code. In one instant you can lose all your assets by interacting with a faulty contract or deceitful individual…that is until GOGOcoin!