Back to Crypto

A “bank” on the blockchain - What is DeFi?

Khanh Nguyen
A “bank” on the blockchain - What is DeFi?

Illustration by Augustus

Finance. It’s been around for as long as people have existed, and it’s unlikely to ever disappear. Today, decentralized finance is on the rise and transforming the financial industry. We’re going to take a look at what exactly DeFi is and how it’s changing everything we thought we knew about finance.

What it means

DeFi stands for decentralized finance, which is financial services that are built on public blockchains, mainly Ethereum.

As opposed to traditional banking, DeFi is global, peer-to-peer, open to all, and not controlled by anyone.

How is it different from traditional banking?

In DeFi:

- Code and a public blockchain allow us to operate in a trustless way

- There are absolutely no bankers

- Anyone with an internet connection can join

- You pay extremely low fees

- You can remain anonymous

In traditional banking:

- Laws and financial institutions control the system

- Customers are served by bankers

- You must do a credit check and have a minimum deposit in order to use their services

- You have to pay high fees

- You have to verify your identity

Why should I care about DeFi?

Traditional financial systems can be unfair with high rates of inflation and monopolistic systems in many countries. With DeFi, we can create a more open, free and fair financial system for everyone.

The pros & cons


- Open: You can get access just by creating a wallet

- Pseudonymous: No need to provide any personal info

- Flexible: You can move your assets anywhere at any time

- Fast: Interest rates and rewards update as quickly as every 15s

- Transparent: Everyone involved can see all the transactions happened on the blockchain


- Lack of insurance in events of hack or fraud

- Your money is gone once it issent to the wrong address

What can I do with DeFi?

- Obtain a loan instantly without filling in paperwork

- Lend out your crypto and earn interest

- Make peer-to-peer trades of certain crypto assets

- Buy derivatives: The crypto version of stock options or futures contracts

Next topic
What are decentralized applications (dApps)?
Quirk app logo

Get Quirk. It's free

Join the 30,000+ people in our community and start your journey to financial independence.

Scan to download Quirk
QR code to download the Quirk app