Decentralized Finance 101—What It Is and Why It Matters

An artists rendering of blockchain technology. SALT Lending wants to create the first lending market based on the technology. Shutterstock

Blockchain is still a nascent technology, but it is perhaps the biggest disruption mechanism that the world of finance has had to deal with. Decentralized finance has gained popularity over the previous year, and not many people fully understand its promise and its pitfalls. Currently, traditional big banks and FinTech startups divide the world of finance. Many FinTech processes are pushing our world into the future, and DeFi is a potential game-changer for finance.

What is DeFi, and why can we change the way we think about financial processes?

Decentralized Finance—What it is

Our current financial systems work in a centralized model. A central authority governs the system and often determines who has and doesn’t have access to it. Centralization exists at every step. Governments decide which institutions get to take part in the system by controlling licensing procedures at the highest level.