What are DeFi applications?

In centralized finance, third parties, such as banks hold cash and facilitate transactions and cash flows between the relevant parties while charging a fee.

Decentralized Finance (DeFi) however, is the application of blockchain technology and smart contracts that emulate traditional financial services in a decentralized manner. Instead of relying on an institution's employees to approve the use of their service and validate a transaction, smart contract(s) on a blockchain are programmed to provide these services. DeFi applications or dapps provide everyone with open, transparent, and inclusive financial services without the need for third parties like banks.

Examples

All the dapps work in a permissionless way, without any type of reliance on a central authority or an intermediary. Here are some examples of DeFi applications:

1. Lending and borrowing applications: These applications allow users to lend or borrow digital assets. Examples include Compound, Aave, and MakerDAO.

2. Decentralized exchange applications: Decentralized exchange or DEX applications allow users to trade cryptocurrencies. Examples include Uniswap and SushiSwap.

3. Yield farming applications: Yield farming applications allow users to earn interest in exchange for depositing digital assets, mostly as additional tokens (cryptoasset or cryptocurrency). Examples include Coinbase and YouHodler.

4. Decentralized insurance applications: Decentralized insurance applications provide the users' insurance coverage for their digital assets and smart contracts. Examples include Opium Insurance and InsurAce Protocol.

5. Prediction Market: Prediction markets or betting markets allow users to trade on the predictions of events like a company's revenue or commodity prices. Examples include Predictlt and Gnosis.

These are just a few types and examples of dapps. It is a rapidly growing field, in a short period of time billions of dollars have already been locked on various DeFi services.