Decentralized Finance (DeFi) is an ecosystem developed on a blockchain network that consists of financial transactions. DeFi uses a decentralized network to create financial services and products. The aim of DeFi is to develop financial services and products transparently.

DeFi also includes financial services on the blockchain network. It provides users with opportunities to benefit from services such as credit usage, interest earning, insurance purchase, and asset exchange. It allows for faster transactions for users while enabling peer-to-peer transactions instead of directing things through a centralized system.

DeFi structures are designed to be trustworthy for users. There is a cause and effect relationship between DeFi systems. In other words, transactions will be made under what conditions are determined within the DeFi ecosystem. Therefore, smart contracts and consensus mechanisms play an important role in the DeFi ecosystem.

The decentralized nature of DeFi means that it is entirely anonymous. Although the user's name is kept anonymous in transactions, the transactions can be transparently tracked by accessing organizations.

DeFi has important tasks such as:

• Creating banking services such as stablecoins.
• Enabling advanced financial tools such as DEX and prediction markets.
• Creating platforms for peer-to-peer and lending.
• Enabling the preparation of financial protocols and payment protocols.
• Including data analysis applications.

How Does Decentralized Finance Work?

Decentralized Finance works with blockchain technology. Transactions are performed through applications called DApps. Transactions in blockchain technology are recorded in blocks and verified by nodes. Through consensus created by nodes, blocks are closed and encrypted. After the block is closed and encrypted, another block is created with information about the previous block.

Blocks create a chain with the information they contain. The information in the previous block cannot be affected or changed. Therefore, the blockchain network is considered secure.

Users can interact with DeFi in many ways:

• Lending: Users can lend their crypto assets and earn interest and rewards.
• Borrowing: Unlike traditional financial platforms, short-term, paperwork-free credit is available.
• Exchange: Users can exchange certain crypto assets peer-to-peer without a third party.

Why Decentralized Finance Matters?

Decentralized finance provides a completely digital alternative to the user. There is no extra fee in this alternative provided. There is a potential to create more transparent and fair financial markets that can be accessed by every user with an internet connection.

What Are the Usage Areas of Decentralized Finance?

Decentralized finance claims to provide a better system than traditional finance systems. DeFi has advantageous usage areas:

• Cheap, fast, and secure transfer transactions everywhere
• Borrowing and lending opportunities for users through borrowing systems
• Tokenization of owned assets

What Are the Benefits of Using Decentralized Finance?

Any user with an internet connection can easily access the DeFi ecosystem without any location restrictions. DeFi provides transparency by enabling users to view their transactions without revealing their identity through the use of blockchain technology. At the same time, the immutability of transactions on the blockchain provides significant security benefits.

DeFi ecosystem has low transaction fees. Being decentralized, it allows users to make independent decisions.

Using decentralized finance has several benefits:

• Accessibility: Anyone with an internet connection can access the DeFi platform. Transactions can be carried out without any geographical restrictions.
• Security and Transparency: Smart contracts published on blockchain networks and transaction records are transparent. Data on blockchain networks cannot be modified.
• Decentralization: DeFi platforms are decentralized, meaning they are not affiliated with any centralized organization.

What Is the Difference of Decentralized Finance?

Decentralized Finance primarily executes transactions in a decentralized way through the algorithm created by the ecosystem. All networks within the DeFi ecosystem can operate on a certain formula. Therefore, there can be no centralized intervention in DeFi networks.

Users who use the DeFi ecosystem are also the ones who operate the system. With DeFi, banking systems such as borrowing or lending between users, offering crypto assets, and fundraising for projects are provided in a decentralized manner.

What Are the Disadvantages of Decentralized Finance?

• Participation in Decentralized Finance is complex and not easily understood by every user.
• Depending on which dApp the user uses, there may be high fluctuations in their investment.