Things have been changing rapidly in the crypto space and DeFi happens to be an ongoing trend and it's quite an interesting space to be.
DeFi is the short form for decentralized finance and it was designed as a financial system that is accessible to everyone and reduces the need to hope and count on a central authority like banks and brokerages.
It is dependent on no single entity and utilizes smart contracts on Blockchain (a public database where thousands of computers all over the world verifies transactions).
Now, I know you are wondering what exactly are smart contracts?
Smart contracts are simply self executing codes stored on the blockchain.
For example, let's say you want to send money to a friend tomorrow, only if the temperature gets to 30°C, such orders can be put down in a smart contract.
Decentralized finance stores all transactions on the blockchain and this reduces the risk of hackers focusing on banks to steal your funds.
Below are the following functions that DeFi performs:
1.Decentralized Exchanges (DEX): This permits its end users to trade and swap their digital assets without trusting any middleman or custodian. Examples of DEX are; Pancake swap, Bakery swap, Uniswap and so forth.
2. Lending and Borrowing Platforms: They offer people lending chances to obtain yearly returns. They also permit individuals to borrow funds at a definite interest rate. It utilizes smart contracts to stand in the place of intermediaries. Examples of such platforms are Aave, InstaDApp, and others.
3. Management of Asset: It plans to make investing swift, affordable and more even. It makes control of funds more clearer and investment opportunities accessible to everyone, regardless of your location. An example is Ampleforth.
4. Yield Farming: This is a golden opportunity for experienced traders to look for prospective defi tokens that have the capacity to generate bigger returns.
5. Prediction Markets: It brings opportunity for individuals to bet on the end results of future incidents such as sports, elections, prices of stock and more. An example is Augur.
Note that DeFi is novel and experimental and isn't without issues but blockchain developers look forward to working on it.