What is DeFi?

DeFi, the acronym for "Decentralized Finance", is also known as Open Finance as opposed to the traditional CeFi "Centralized Finance". DeFi refers to the decentralized protocols used to build an open financial system that allows anyone to perform all types of financial activities anytime, anywhere. In the existing financial system, financial services are mainly controlled and regulated by a central system, whether it is the most basic deposit and withdrawal transfers, loans or derivatives transactions; DeFi aims to establish a transparent, accessible and inclusive peer-to-peer financial system through distributed open source protocols, minimizing the risk of trust and making it easier and more convenient for participants to participate in it.

What are the features of DeFi?

DeFi offers three major advantages over traditional centralized financial systems.

  • Decentralized, with no need for any intermediaries to build trust relationships and transactions completed directly through smart contracts.

  • Data are stored in blockchain, transparent and accessible to all.

  • Protocols are open source, allowing anyone to collaborate to build new financial products on top of existing protocols and accelerate financial innovation with network effects.

DeFi also has several disadvantages over traditional centralized financial systems.

  • Relatively niche, high barriers to entry and education costs.

  • The user experience is not as smooth as with CeFi products, as many DeFi products are web-only and not mobile app-only.

  • The security of many smart contracts is yet to be proven and some code issues can lead to hacking. Such issues have previously been seen with bZx, Curve and MakerDao.

  • Partial DeFi is only relatively centralized and not fully decentralized, and remains a potential risk of market manipulation.

  • The ecology is relatively fragile, with a domino effect of default if the pledged currencies experience large price fluctuations.

What are the main applications of DeFi?

DeFi is a relatively broad concept, and the concept of decentralization can be used to innovate and transform the existing financial system at all levels. To give a brief and incomplete overview, DeFi applications can be divided into three major categories and nine sub-categories. The three categories of applications are Issuance, Trading and Ownership.

  • The Issuance category includes stable coins, represented by Maker/Dai, AMPL; decentralized lending, represented by Compound; and securities, insurance, NFT, represented by bZx, Polymath.

  • The trading category includes the decentralized exchange DEX, represented by Uniswap; decentralized derivatives, represented by dYdX, Augur; and liquidity providers, represented by Kyber Network.

  • The ownership category includes decentralized wallets, represented by Metamask, decentralized money management, represented by ICONOMI, and decentralized payment methods, represented by Lightening Network and Sablier.

What is Yield Farming?

Yield farming is the process of generating revenue by depositing or lending designated token assets as required to provide liquidity to the product's pool. The proceeds may be the project's native token, or the governance rights it represents.

What is MiFi?

MiFi is the collective term for the DeFi project based on the Mixin ecosystem, proposed by @Cedric Fung.

MiFi doesn't refer to a single product, it's a concept. Like DeFi, it's a concept, not a product.

What are the advantages of developing MiFi based on Mixin?

Mixin Network has the following advantages.

  • Natural cross-chain support.

  • Second-level confirmation of transactions.

  • No gas fees for transactions.

  • Mixin Trusted Group with smart contract-like technology.

Last updated