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How does DeFi works?

By Eshwar ;) | Money Spotlight | 17 Jul 2022


DeFi, or decentralized finance, is a growing industry that is built on the Ethereum blockchain. DeFi projects are springing up all over the place, and they offer a wide range of services, from lending and borrowing platforms to stablecoins and tokenized BTC.

But how does DeFi actually work?

In a nutshell, DeFi is built on the premise that financial services should be open and accessible to everyone, regardless of location or background. By using Ethereum smart contracts, DeFi projects can offer a wide range of financial services that are available to anyone with an Internet connection.

One of the most popular DeFi projects is MakerDAO, which is a lending and borrowing platform that is backed by ETH. MakerDAO allows users to collateralize ETH and lock it up in a smart contract in order to generate Dai, a stablecoin that is pegged to the US Dollar.

Dai can be used in a number of different ways, including being used as collateral for other loans or being traded on decentralized exchanges.

So, in a nutshell, that’s how DeFi works. By using Ethereum smart contracts, DeFi projects are able to offer a wide range of financial services that are available to anyone with an Internet connection.

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Eshwar ;)
Eshwar ;)

My name is Eshwar. I work as a freelance content writer. When I'm not answering client calls, I'm probably watching cartoons.


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