In 21 century we have witnessed of development of new generation of disruptive technologies, such as blockchain which can fundamentally change the face of the financial and data industries as we know it today. Though bitcoin is the first and better-known application of its underlying technology, blockchain, the prospects of utilization of the technology goes beyond decentralized currency, opening a new era of distributed solutions. Blockchain technology is a decentralized and immutable data sharing system that enables the storage of state information in a verifiable and permanent way. The technology is particularly well suited for transactional applications, enabling trustless interaction between two parties. As its first viable application, blockchain technology has been initially applied as the foundational layer for cryptocurrencies bringing up several unique value proposition in the space including but not limited to decentralization, disintermediation and censorship resistance. As a common ledger, shared with all members of the network, every participant acts in the system with encrypted identity (enjoying unanimity), and the transactions conducted are registered in the same ledger and shared with everyone.
Soon after the initial blockchain application as the fundamental layer powering the crypto-systems the technology got several new use-cases, as it enables to effectively achieve consensus on shared state in a network without central integration point, which is a true breakthrough in computer science. The further development of Turing complete, programmable smart contract technology (by Ethereum) opened endless prospects of other applications. The technology enables the development of programs empowered with fully immutable codebase, auditable and verifiable by community (not controlled unilaterally by a single participant).
DeFi is a new generation of financial infrastructure fully built on top of blockchain, enabling decentralized execution and no single point of failure. Being based on the top of blockchain DeFi solutions do not need to comply with financial regulation and do not rely on a single party to conduct efficient management.
The main idea behind DeFi is to enable the development of the financial infrastructures and instruments in a fully community-driven way, democratizing access to sophisticated financial products and adopting a fair governance and profit distribution mechanism which is fair to everyone. DeFi recreates traditional financial services — i.e. lending & borrowing, trading, and even insurance — tailored for storing, earning, or transferring digital assets.