How does decentralized finance operate, and why is it challenging Wall Street?

What would life be like in a world without banks be like? The solution could be found in decentralized finance.

Decentralized finance is a new ecosystem of financial applications and protocols based on blockchain technology with programmable features, such as ethereum and solana. The transactions are carried out automatically via smart contracts on the blockchain, which involve the agreement of the deal.

"Anyone can actually develop businesses on top of these protocols and use them in the same manner that we can construct an internet business on top of the HTTP IP protocol today," said Stani Kulechov, founder of the Aave DeFi protocol.

According to CoinGecko, decentralized finance has only 5% of the crypto sector, but it has seen enormous growth recently. As of June 2021, there were $93 billion in DeFi assets on the crypto market, up from $4 billion just three years before. To be fair, DeFi's growth has slowed since the summer of 2020, and regulatory attention from Capitol Hill has increased due to concerns about crypto's tainted history.

Learn how decentralized finance works, why it is booming, and why authorities are keeping a careful eye on it in the video from CNBC:

Source: CNBC

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