wtf is DeFi?
Since ’97, the only Fi I’ve known and cared for was WiFi. And until 2020, I was one Fi woman. 😉
That summer, the world was introduced to a brand new way of doing finance that would completely turn things upside and inside out — in all the best ways. It will be forever be etched in history as the Summer of DeFi.
Unlike our current centralized model of finance, DeFi would empower everyday people like you and I. How? Well, that’s why we’ve written our “wtf is x” series — to help you evolve from DeFi Doubtful to DeFi Daring.
wtf is DeFi?
When I first heard about DeFi, I Googled ‘defy’ and let me tell you, the results were not promising. I assumed that I’d have to make my way into the dark web in order to actually find something valuable, so I gave up ’cause that shit is scary. And I am too little to be in jail. Let me save you the time and the irrational fear.
Here’s the f3 translates version instead:
Let’s begin by breaking down the word: DeFi
De = Decentralized = not controlled by one single decision maker
+
Fi = Finance = all activities related to money
When we put the two back together, DeFi is any activity related to money that isn’t controlled by one single decision maker — all on the blockchain.
Why should I care about the DeFi?
When the bank’s involved, anytime you do something related to your money, they decide what to charge you and when to charge you. With DeFi, you get to be the bank. 🤑
Instead of paying the bank a fee for sending your friends money or pay the bank interest for borrowing money, you can completely remove the bank in the equation. What’s even better is that you can make the fees and interest that the bank would otherwise charge it’s customers by lending your money.
This means tons of opportunities for you to make your money actually work for you, and even more opportunities for you to build businesses that scale this affect. Say adios to those ridiculous 0.5% interest rates on savings accounts and 19.75% interest rates on credit cards.
Give me an example.
Centralized Finance (Current banking system):
You put $1000 in your bank account for a year → The bank gives you 0.50% interest ($5)
The bank takes your $1000 and lends it someone else, charging them 3% interest ($30)
= the bank makes $25
Decentralized Finance (DeFi):
You lend $1000 to your friend directly from your wallet to their wallet and pocket the full $30 in interest.
Smart contracts written on the blockchain guarantee that the money is returned to you when the year is over. If you’re not convinced, check out our wtf is the blockchain article below.
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Some of the more simple things we can on DeFi today include payments, trading, lending, and borrowing. Remember, anything related to finances is risky — this is especially the case with DeFi because it’s so new that the rules and the laws around it still haven’t been written. Also, always and forever beware of hackers.
Feeling curious? Here are a few more articles from F3.
wtf is cryptocurrency?
wtf is web3?
wtf is an NFT?
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wtf is f3?
f3 stands for fuck 3. Fuck the less than 3% of all venture capital that went to female founders. f3 stands for funding female founders, and that’s what we’re doing. Join our community today: f3vc.com
