What is DeFi?
DeFi, or "Decentralized Finance", is an emerging financial system infrastructure that aims to disrupt the traditional way of banking, in that there won't be a need for any central control system to regularise transactions. DeFi applications run on the blockchain technology primarily Ethereum, and they use cryptocurrency as the means of exchange.
DeFi lets you do what the traditional banking system supports such as borrowing, lending, interest, asset trading, and lots more, but DeFi is way faster and doesn't require any paperwork.
There was a rapid growth in the value of DeFi assets attached to DeFi contracts between 2020 and 2021 because according to Defi Pulse, these values grew from about $697 million at the beginning of 2020 to $85 billion in August 2021.
Why is DefI Important?
Fiat currency is stored via financial institutions and this means that there are many third parties involved in your finances. You need to go through the traditional banking system before you transact digitally either for friends and family or for business purposes. This process is tied to a central control system which sometimes could be slow and expensive in a sense because of the transaction fees. Transacting through a centralized system also means that the financial institutions will have access to all your transaction records.
This is why decentralized finance is important because you won't need to worry about transaction speed, and transaction fees and all your transaction records are safe as well.