Decentralized finance, more commonly known as DeFi, presents a fundamental shift in the way we’ve built our financial system. It’s the building block of the world’s No. 2 cryptocurrency, Ethereum. If you don’t have a solid understanding of it yet, it’s time to get started.
At its most basic, DeFi is a different use of blockchain, the underlying technology of cryptocurrencies such as Bitcoin. It has the potential to remove banks from the equation, creating a more transparent, traceable system that makes finance accessible to a broader range of people. From crowdsourcing student loans to expanding investment options, DeFi can give you more financial choices.
But it’s not something you want to enter blindly. As a survey by Cardify found, only 15% of crypto investors said they fully understand crypto’s value and potential. If you wish to understand some of the emerging trends in modern finance — while avoiding the perils — you’ll need to understand DeFi.
How to get started
Begin by conducting your own research on blockchain, DeFi’s underlying technology.
The key is finding credible, objective sources. That means investigating the sources’ motives and avoiding sites that describe something as all good or all bad. A quality source discusses the pros and cons. If they don’t mention that most digital wallets aren’t FDIC insured, for example, you’re likely in the wrong place.
One way to start would be watching this video by mathematician Grant Sanderson explaining how Bitcoin actually works. Then you could dive deeper by exploring information resources offered by Coinbase and GitHub.
Next, you can consult resources provided by decentralized autonomous organizations, or DAOs. DAOs are ownerless digital groups that exist on the blockchain and pursue a collective purpose. Contributors to these organizations are often at the cutting edge of their topics of expertise, so they can be a great source of information.
Do all that you can to tread a little…
