What is defi and what are some key projects you should know about in this space?

Defi stands for decentralized finance and refers to projects that aim to democratize financial access and remove central intermediaries such as banks and companies. The vision is similar to that of a cooperative: an entity that people own and operate.

The difference with Defi is that technically no one owns the projects and no one operates it. Defi protocols run on their own. A community of supporters continue to upgrade the code. They do this either on a voluntary basis or in return for a reward that everyone agrees on.

Defi came about as soon as Ethereum emerged. The smart contract functionality that Ethereum offers allows anyone to build a protocol on top of it that acts according to specified rules.

For example, you could create a lending and borrowing protocol such as Compound or a stablecoin protocol such as DAI.

Projects usually start off as projects with central teams. A VC will often invest in and sponsor the project. Sometimes Defi projects bootstrap funding through an ICO or IDO (initial discord offering). Once the project kicks off, the founding team distributes governance tokens to active community members.

Communities of supporters gather on Twitter, Discord and Telegram. At this stage the project is considered decentralized. It is important to cross check this by looking at the governance structure and what proportion of tokens the core team still retains.

The only way to really understand this space is to dive into some of the projects.

Check out key Defi protocols below

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