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What is DeFi? – Overview of the investment potential of the decentralized financial market

 The field of digital currency is increasingly asserting its position in the financial market. Among them, the most prominent is the decentralized financial model – DeFi. The following article will help you learn more about what DeFi is Potential and future development opportunities of DeFi exchange? How to make money with DeFi trends?

What is DeFi ?

DeFi is the abbreviation of the English phrase Decentralized Finance. DeFi is a model established in the form of open finance or decentralized finance. DeFi is built and operates on cryptocurrency and blockchain technology . 

In other words, DeFi is a financial model using Blockchain. This is the network on Ethereum that has a combination of smart contracts and Dapps. DeFi focuses on lending, derivatives, exchanges and trading… 

What is DeFi (decentralized market)?

What is DeFi (decentralized market)?

Thanks to the support of DeFi, investors will control assets more effectively such as: lending, payment, transaction, investment, etc. DeFi was not created by any individual. The first DeFi application founded was MakerDAO by Rune Christensen.

CeFi (traditional financial market or centralized financial market)

CeFI stands for Centralized Finance , where institutions, trading markets or financial instruments will be centrally managed. In the CeFi market, there is often a "trust" of assets such as finance, products, and services to a third party.

Difference between traditional DeFi and CeFi models 

Through the concepts of what is DeFi will draw the difference compared to the traditional Cefi model. At CeFi, control of assets is handed over to 3rd parties such as financial institutions and banks. Investors need to follow the rules issued by the authorities and are not allowed to violate the regulations.

The difference between Defi and Cefi

As for DeFi, it gives direct management rights to investors, not under the control of any individual or organization. The goal of this system is equity and democratization. Transactions and data are completely transparent. 

Why was the DeFi market born?

In essence, the DeFi decentralized financial market is seen as a remarkable endeavor of mankind. DeFi will help reduce government power in the traditional financial markets.

The reason for this birth is because in the CeFi centralized financial playground, your assets are not completely controlled by yourself. The value of the currency you are holding can completely depreciate just because the government prints more money causing inflation to your existing assets.

There is no guarantee that your assets will be absolutely safe in the banking system and the rate of return will be steady every year. You can't see the future and don't know when the bank will lose money and go bankrupt.

When you entrust the opportunity to make your own money to a third party to use your assets to invest, the risk is extremely large. We see a lot of articles accusing financial institutions of using this method for profit and it is this trust that is the foundation for the multi-level ponzi model to develop.

Why is decentralized finance (DeFi) different?

What characteristics does decentralized finance have that make people believe that DeFi is really different from traditional centralized finance?

Easy access

In the 4.0 era with you having an Internet connection, you can completely access DeFi because this is an open market for everyone.

Interactive abillity

DeFi has built and perfected an ecosystem of its own that can expand further. It is this that helps everyone to have an updated and diverse platform over time.

Information security

If you open a bank account you need to have an identity card to register your name on your account. This is extremely common in the CeFi market, but in the DeFi market all your personal information is kept completely confidential.

DeFi will limit access to personal information from third parties (government, institutions, banks, insurance, etc.) that have investor information. From there, it can be said that DeFi is an upgrade of Blockchain by using great features of personal security for its ecosystem.

Accurate and transparent

All data on market activity will be publicly visible to all participating investors, in this market the concept of VIP will not exist.

Components of Decentralized Finance

Defi is made up of applications, components that create a solid premise. Here are the basic components:

  • Decentralized money market: DeFi develops through borrowing and lending. People with capital deposit money and earn profits from borrowers with high interest rates.
  • DEX has a role to help investors control the amount of money when trading with low fees. While exchanges focus more risk, due to sharing financial information of investors.
What is Defi applied in the project?

Project, Application Defi

  • DeFi has an ecosystem platform of Stablecoins that provides high stability. Because in essence, Stablecoin is a coin that holds value before the fluctuations of the cryptocurrency market.
  • Defi's Decentralized Insurance thrived in various forms to overcome limitations. Because there are actually many mortgage loans. If hackers attack the source code of a Dapp, there is a high risk.

What are the core benefits of decentralized markets (DeFi)?

Every new upgrade in the 4.0 era has a mission to create equality, improve and help everyone's life become better. DeFi is no exception in the current globalization trend, the mission of the decentralized market is:

True Decentralization: Resists government surveillance, creates an open market for all social classes to participate, and is a reputable third party that is not bound by any organization or country. which family.

DeFi uses Blockchain technology platform as the infrastructure, it can be said that Blockchain is the breath of the decentralized market, so all transactions on DeFi are fast, safe and absolutely secure.

Owning the private keys to their assets gives investors peace of mind that their assets will not be lost or stolen from anyone.

Transparency helps to minimize group interests and individual interests dominating the market in the same way that corporations or large companies are dominating the state economy. Inequality in society is therefore increasing in the CeFi market, on the contrary DeFi is fighting that unfair profiteering and bringing fairness to everyone.

How does DeFi work?

On a decentralized financial system, all operations take place without human intervention. The rules are written in code and everyone can fully audit and monitor commercial contracts signed by smart contracts.

However, for identity security reasons, Smart Contracts will be displayed on fake by default without displaying the real name of the user.

Important Notes When Making Money With DeFi Trends 

When making income with Defi, you need to keep a few basic things in mind for the best results:

  • Must invest effort and time to learn knowledge about Defi. You must understand the field you invest in to make money.
  • When participating, you should not Fomo, that is, do not be swayed by the information flows of individuals or the community. In particular, do not borrow to invest, but join with available capital to both play and gain experience.
  • Do not give anyone your Private Key wallet address.
  • Regularly monitor Bitcoin price movements. Since this is a major cryptocurrency in the market, the volatility of this coin will lead to the change of other Alcoins. 

What are the advantages and disadvantages of DeFi ?

Following are the advantages and limitations of Defi: 

Advantages of Defi

  • The transaction process does not involve a third party.
  • Users have complete control over their assets thanks to an established code program that resolves any disputes that arise.
  • Low fees facilitate traders.
  • The support of the Blockchain platform makes it easy to build and upgrade many new DeFi applications.

Disadvantages of Defi

  • Users need time to learn and get used to using DeFi, because Cryptocurrencies are tied to electronic assets.
  • Defi also has vulnerabilities in DeFi Dapps that hackers often target. 

DeFi's Future Potential 

DeFi attracts money inflows that increase over time. Defi's total capitalization multiplied 12 times and reached 13.98B at present. This is a market that opens up attractive money-making opportunities for investors. In the future, an open finance will be formed and developed where decentralized finance is the key point.

The community will gradually dislike the control in financial management. The new trend gradually shifts to the comfort and freedom of DeFi. Investors will control and manage assets by themselves without being dependent on other organizations or third parties.

Risks of DeFi

DeFi also has risks like the CeFi platform that investors need to be aware of. Vulnerabilities of security issues. Even though smart contracts are set up to be highly secure, good hackers can still find loopholes to break in. Therefore, DeFi is trying to improve the security of smart contracts.

As we all know, the cryptocurrency market is always volatile and relatively new. You can make a lot of money here but also risk it after a day. Therefore, before investing, you should study the market well, understand the risks to optimize income. 

Learn about DeFi Coin 

Below is an image listing potential DeFi Coins by market capitalization.

Top Defi coins by market cap

In order for Defi investment to bring more profits, it is necessary to choose on the following criteria:

  • Blockchain equipped with new features than blockchain 1.0, 2.0. 3.0. At the same time, data storage is good and scalable.
  • The transaction process has a fast processing speed.
  • Bringing interesting and new experiences to users, smooth Dapps.
  • Smart contracts are more secure than the old generation.
  • Equipped with Protocols to effectively support Dapps.
  • Can be bought at a good price.


Above the article has summarized the knowledge about what DeFi is and its potentials and opportunities in the future. Hope to help you have an overview of DeFi to succeed with this form of money. It is important for new investors to thoroughly understand the group of coins before making money. And don't forget to follow channel to update the latest information in the Crypto market.