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What Does Decentralized Finance (DEFI) Mean?

February 28, 2022

DEFI is an emergent technology that is built on blockchain technology (secured distributed ledgers). What is the blockchain? We will discuss this in detail later but the blockchain, are transactions recorded in “blocks” which are linked together by chains and then verified by other independent users. Once these independent users or “verifiers” agree on a transaction, the block is closed and encrypted, and another block is created which then contains all the information about the previous block. 

These blocks contain a hash (a digital fingerprint or unique identifier), timestamped batches of recent valid transactions and the hash of the previous block. The previous block hash links the blocks together and prevents any block from being altered or a block being inserted between two existing blocks. 

The method renders the blockchain tamperproof, lending to the key attribute of immutability. 

With DEFI you can do every financial transaction that you can do at a traditional financial institution, except DEFI is paperless and far quicker and does not require expensive 3rd parties to process. DeFi is also a transparent system where the transactional record is maintained by several entities and not controlled by a single source and the financial transactions are peer-to-peer reducing costs by cutting out the middle entity. This brings equity to a financial transaction. 

Most DeFi is built on top of The Ethereum platform which allows for far more complex financial structures to be built then simple financial transactions. Ethereum was created by Vitalik Buterin back in 2013. Ethereum allows for a “smart contract” which automatically executes if certain criteria are met. Ethereum utilizes program languages such as Solidity to create and deploy these smart contracts.  

Some of the key features of DeFi are that it eliminates hefty bank fees. Money is held in a secure digital wallet instead of keeping it in a bank and is accessible to the end user at any time, day, or night. Anyone with an internet connection can have access to their own funds and you can transfer funds in seconds and minutes, borderless. 

In general, DEFI has been designed to use cryptocurrency as its transacting medium, but at Empowch we are utilizing innovative technology to seamlessly integrate the traditional fiat currency sphere with the crypto sphere by harnessing the strength of Stable Coins to allow for borderless transactions.  

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