Why Is DeFi Based on Ethereum Network?
Despite the scalability and high gas fee glitches, Ethereum is still the gold standard of DeFi. Open this link to learn more.
Published April 7, 2022.
Decentralized finance, abbreviated as DeFi, is an umbrella term for financial products and services built mostly on the Ethereum ecosystem. DeFi ensures financial markets and services are open 24/7, without centralized entities to block transactions or deny access to services.
Financial products and services that were previously slow and prone to human errors are automatic and secure thanks to DeFis key features. DeFi apps allow people to borrow, lend, save, invest, and more.
Read on to discover why DeFi is based on the Ethereum blockchain.
Can Anyone Use DeFi?
Yes, anyone in the world can access and use DeFi as long as they have a stable internet connection. DeFi eliminates middlemen by enabling people to perform financial transactions through blockchain technology, like Ethereum.
As long as you have a stable internet connection and a digital wallet, you can borrow, lend, insure, trade, or invest using smart contracts that execute instructions automatically. Since the Ethereum network is accessible across the globe, it collects and stores information from users. It leverages a consensus mechanism to verify transactions.
DeFi apps give users complete financial ownership over their assets through digital wallets and trading services.
Can People Own Smart Contracts?
Yes, people can own smart contracts since they are permissionless. Anyone can create a smart contract on a blockchain network. You simply need to learn coding in smart contract languages and have adequate ETH to run them on the Ethereum blockchain.
Ethereum is the ideal blockchain for DeFi for several reasons:
• No one owns Ethereum or its smart contracts, preventing censorship prevalent in private blockchains. Additionally, no single entity can change the coded rules without consensus.
• DeFi products and services share the same language behind the scenes – Ethereum. In other words, they interact seamlessly. For instance, you can borrow tokens on a certain DeFi app and trade them on a different app.
• Ethereum permits total financial freedom as most DeFi apps do not control user funds.
Despite its weaknesses, Ethereum remains the gold standard for DeFi applications. It will continue to be a DeFi champion since it is determined to solve its scalability and high gas fee problems.