Decentralized finance – how it works

Decentralized finance – how it works

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The functioning of decentralized finance is based on a fewfundamental points. A sector in enormous turmoil, within which we can find very different tokens and projects, with one characteristic in common: replicating those services provided by banks, exchanges and exchanges without intermediaries: basing everything on the strength of the Cardano Blockchain and smart contract.

The fundamentals are described as follows and in detail and only on these the entire decentralised finance is functioning and these are :

Exchange of values

Which means, very simply, payments. In this aspect, the question of old cryptocurrencies could be contested, which were never considered as  Defi but still offer an exchange of value or tokens. In reality, however, the newer projects, which aim to establish themselves in this specific niche, offer something more than the old generation crypto. When discussing the possibility of integration with other blockchains, directly or through other connecting blockchains, which could offer services related to paid ones.

Execution of contracts

We are talking about rt contracts, a sort of algorithm with a contract inside, which can go into execution whenever the right conditions are met. The smart contract is a reality that has existed for several years. But despite this, it is in the last 2 years that they have begun to take hold also for concrete uses. They are also very popular for the creation of decentralized exchanges, which have the great advantage of being faster, cheaper and safer.

Data for contracts

Several blockchains are concerned with providing another fundamental aspect of decentralized economy and finance: data. Because if smart contracts can have an automatic execution, today, also based on data coming from outside the world of the blockchain. Several projects deal with providing other blockchains or projects with reliable data, mainly for use in Decentralized Apps and contracts.

Interested loans and deposits

One of the liveliest worlds of Decentralized Finance are the systems that allow you to borrow and borrow, generally new generation cryptocurrencies and stable coins that are instead anchored to the value of a classic currency. One can take a look at that later when there are many interesting projects under this specific aspect and that allows us to have liquidity for our projects on the one hand, and to be remunerated for having deposited sums on the other.

Decentralized finance cryptocurrencies are a good investment opportunity, at least when they are linked to solid projects that can develop in the future.  Many of those we have listed in our guide are already among the best performers in the sector

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