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Decentralized Finance Explained

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What is it?
Decentralized finance (DeFi) is an emerging financial technology that challenges the current centralized banking system. DeFi eliminates the fees that banks and other financial companies charge by using blockchain technology to create a peer-to-peer ecosystem that allows users to lend, borrow, and trade cryptocurrencies without intermediaries. The transactions are executed automatically through smart contracts on the blockchain, which includes the agreement of the deal.
The risks of using DeFi include financial risk, procedural risk, and technical risk. Financial risk relates to potential rewards of investment opportunities and management of the opportunities. Financial risk is commonly attributed to an organization or the risk tolerance of an individual. Procedural risk relates to the processes and procedures that are used to manage the DeFi ecosystem. Technical risk relates to the security of the DeFi ecosystem and the potential for smart contract vulnerabilities.