More and more organizations are harnessing the power of the open-source financial ecosystem to solve problems and create new opportunities. Smart contracts are the gateway into DeFi applications as they are completely trustless, and do not have any third-party interference. The main advantage of smart contracts is that they are practically impossible to breach – once a contract is submitted to the blockchain, there’s no turning back, and no way to reverse it or change its settings. A smart contract is an agreement that has been coded into the blockchain. We have talked about smart contracts in the past. When you think about what is DEFI and why it is important for companies to apply it in contracts, think of it in the context of optimization of existing processes and operations. For companies that deal with multiple vendors or suppliers, this could mean thousands of dollars in savings. When it comes to financial transactions and supply chains, that middleman can be anything or anyone – a bank, an individual acting as an escrow, a developer who has written code for the application that you’re using, and so on.įollowing that train of thought, the main benefit of DeFi is the fact that it allows for trustless financial processes to take place within its ecosystem. As such, it is important to understand what is DEFI and why it is important for companies to apply it in contracts.īeing decentralized means that contracts can function without a middleman. DeFi is closely related to cryptocurrencies or rather – the blockchain technology that underpins them. Think of it as an umbrella term for a whole huge financial infrastructure that focuses on and empowers decentralization. The acronym “ DeFi” stands for decentralized finance.
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