Defi is not so magical, it is smart contracts.

What exactly is DeFi? This word that no one has heard before must be confusing to many people. In short, it is just a concept relative to the current financial system CeFi (Centralize Finance), the full name is Decentralize Finance (Decentralized Finance) ), which in vernacular is a financial system without middlemen.

The original intention of the blockchain is to decentralize the financial system, so I think this term is a bit old-fashioned. The platform architecture provided by Ethereum and the relatively easy to write "smart contracts" allow the original intention of the blockchain to generate more applications. These applications are combined into an ecosystem called Defi.

Smart Contract: A program-driven, self-executing contract.

The term Defi first appeared in Telegram chats between entrepreneurs and Ethereum developers in 2018, while the first DeFi application is believed to be MakerDAO's stablecoin-based lending platform that allows users to borrow a device called Dai the native token.

Liquidity mining: temporarily provide one's own cryptocurrency to go out, indicating that there will be more assets on the platform for other investors to trade.

Due to the introduction of the design of "liquid mining" in the past two years, various applications of Defi have begun to develop rapidly. The principle of liquidity mining is very simple. Simply put, it is to temporarily put your spare money in the trading market. You are willing to temporarily provide your own cryptocurrency to go out, indicating that there will be more assets on the platform for other investors to carry out. Transactions, which are called "liquidity", are designed with complex mechanisms in the middle. Anyway, in the end, the cryptocurrency you originally provided will be returned, and additional rewards will be added.

Going back to the conclusion, most of the applications in Defi are actually benchmarking against the existing financial system, except that the middleman is removed to allow "smart contracts" to be automatically executed. As for the more mainstream applications in Defi, the following are:

• Decentralized Exchanges (DEXs) : Directly connect users so they can trade cryptocurrencies with each other without trusting a middleman for money.
• Stablecoin : A cryptocurrency whose price is relatively stable pegged to an asset other than cryptocurrencies, such as USD or EUR, such as USDT, DAI, and OHM.
• Lending platforms: These platforms provide services for lending and borrowing cryptocurrencies using smart contracts.
• WBTC (Wrapped BTC): A way to send Bitcoins to the Ethereum network, so that Bitcoins can be used directly in Ethereum’s DeFi system, earning interest on Bitcoins lent through the above-mentioned decentralized lending platforms.

As for what Defi 2.0 is, we will leave it to the next introduction.