What are the key differences between decentralized finance and traditional finance?

What are the key differences between decentralized finance and traditional finance?

Decentralized finance (DeFi) operates on blockchain technology, allowing peer-to-peer transactions without intermediaries, while traditional finance relies on banks and financial institutions.

What are the advantages of using DeFi over traditional finance?

DeFi offers greater accessibility, lower fees, and increased transparency. Users can access financial services without needing a bank account.

Are there any risks associated with DeFi?

Yes, risks include smart contract vulnerabilities, market volatility, and regulatory uncertainties. It's important to do thorough research.

How does liquidity work in DeFi compared to traditional finance?

In DeFi, liquidity is often provided by users through liquidity pools, while traditional finance relies on banks and market makers to provide liquidity.

Can you give examples of popular DeFi platforms?

Sure! Some popular DeFi platforms include Uniswap, Aave, and Compound, which offer various financial services like trading and lending.