Take bitcoin, for example: The original crypto asset is basically a ledger (its blockchain) that is decentralized because the transactions are recorded in databases on many different computers. One of the core tenants of decentralized finance is that it’s, well, decentralized.
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“Etherum wanted to be peer-to-peer everything.”ĭeFi is an amalgam of cryptography, finance, and software development, and it tends to be shrouded with its own lexicon and jargon. “Bitcoin wanted to be peer-to-peer money,” Camila Russo, founder of the crypto news service The Defiant, wrote in her book The Infinite Machine. The roots of decentralized finance come from the 2008 bitcoin whitepaper that set out the framework for a novel system for digital cash those creation exploded into something bigger when Ethereum was invented a few years later. Some $90 billion of collateral is locked up in these services, and more than 10 million people have downloaded MetaMask, one of the most popular digital wallets used to open up access to these networks. A user with a crypto wallet can trade digital assets, get loans, or take out insurance, among many other things. Three years later and DeFi is big business. That’s when a group of software developers and entrepreneurs were trying to decide what to call their movement of new-breed financial services that would be automated, built on a blockchain, and capable of stripping out traditional banks.
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The term decentralized finance, or DeFi, goes back to a Telegram chat in 2018.