12.02.2022 — ABCs of DeFi | What is DeFi?

6 min readDec 2, 2022

Starting a new article today — “The ABCs of DeFi” and it covers the basics of decentralized finance (DeFi).

In this article, we will cover topics such as what DeFi is, how it works, and why it is essential. Whether you are new to DeFi or a seasoned veteran, this series is a great resource for understanding the basics of this growing ecosystem.

The ABCs of DeFi: A Beginner’s Guide to Decentralized Finance

Decentralized finance — often called “DeFi” — refers to the shift from traditional, centralized financial systems to peer-to-peer finance enabled by decentralized technologies.

Since the birth of Bitcoin, the world of cryptocurrency has been growing and expanding at an exponential rate. With the rise of Ethereum and other smart contract platforms, a new world of decentralized finance (DeFi) has emerged.

Whereas traditional finance is based on centralized institutions and intermediaries, DeFi is built on decentralized protocols and platforms. This new paradigm of finance offers many benefits, including trust-minimized, non-custodial, open, composable, and programmable financial services.

In this article, we’ll cover the basics of DeFi and explore some of the protocols and platforms in the space.

What is DeFi?

Decentralized finance, or DeFi, is a catch-all term for financial applications mostly built on Ethereum or Binance Smart Chain that are not controlled by any central authority.

These protocols and platforms offer a wide range of financial services and products that can be used by anyone with an internet connection.

DeFi protocols and platforms are often referred to as “building blocks” because they can be used to create a wide range of decentralized applications (dApps). These dApps can be used for everything from lending and borrowing to trading and investing.

The DeFi ecosystem is growing at a rapid pace. According to DeFi Pulse, there is currently over $50 billion worth of value locked in DeFi protocols. This is an incredible amount of growth considering that the total value locked in DeFi protocols was just $1 billion in January 2018.

What are the benefits of DeFi?

There are many benefits of DeFi, including:

1. Increased Transparency: Currently, the majority of DeFi platforms are built on Ethereum and Binance Smart Chain, which are public ledgers. This means that most of the transactions on the platform are transparent and viewable by anyone.

2. Increased Access: DeFi platforms are open to anyone with an Internet connection. This makes it accessible to anyone in the world, regardless of location or economic status. Besides, Defi is open-sourced, so it can contribute to the development of the Community it interacts with.

3. Increased Opportunity: DeFi offers a wide range of financial protocols and platforms. This allows users to experiment and find the best solution for their needs.

What are the key components of DeFi?

The key components of DeFi are:

1. Blockchains: Blockchain is a type of digital ledger that allows transactions to be securely recorded and verified. Blockchains are often used as the settlement layer for decentralized finance (DeFi) services.

2. Decentralized Exchanges (DEXes): DEXes are decentralized exchanges that enable the exchange of cryptocurrencies without the need for a centralized intermediary.

3. Digital Assets: Tokens that represent value and can be traded or transferred within a blockchain network. Cryptocurrencies, such as Bitcoin and Ethereum, are the most well-known examples of digital assets.

4. Wallets: A wallet in crypto is a digital place to store your cryptocurrencies. It can be an online service, a computer program, or a physical device.

5. Smart Contracts: Smart contracts are software codes that automatically execute, control, and document transactions on a blockchain platform according to predefined terms and conditions.

6. Stablecoins: These are a type of cryptocurrency that is pegged to a stable asset such as the US dollar.

7. Oracles: Oracles are essentially data feeds that allow information from sources off the blockchain to be integrated into DeFi services. This allows DeFi services to provide up-to-date information about things like the current price of a stock or fiat currency.

8. Governance Systems: Governance systems are software mechanisms that manage and oversee changes to smart contracts or other blockchain protocols. These systems are often based on tokens that give voting rights to stakeholders. This allows for a decentralized way of managing changes to these protocols, as opposed to having a single entity in charge of making changes.

9. Decentralized Autonomous Organizations (DAOs): DAO is a decentralized autonomous organization that is governed by smart contracts. This enables the organization to be decentralized and autonomous, meaning that it is not controlled by any central authority.

10. Decentralized Applications (Dapps): Dapps are decentralized applications that are built on a blockchain network.

Notable DeFi Protocols:

There are a number of popular DeFi protocols and platforms like Nemesis 2.0., and Helena 3.0.

Let’s take a closer look at these protocols:

Nemesis DAO (DeFi 2.0):

Nemesis DAO is a decentralized reserve currency protocol built on the Binance Smart chain. The aim of Nemesis DAO is to create the go-to reserve currency that the BSC needs while optimizing for short & long-term profit for holders of the NMS token. Participation in Nemesis DAO is simple and rewarding, with two main strategies for users of Nemesis DAO: staking and bonding. Stakers stake their NMS tokens in return for more NMS tokens, while bonders provide LP or BUSD tokens in exchange for discounted NMS tokens after a fixed vesting period. Nemesis DAO is a community-driven DAO and participants can get involved through discussions on Discord & TG.

Helena Financial (DeFi 3.0):

Helena Financial is an innovative Auto-Staking and Auto-Compounding protocol that promises to simplify the staking process and maximize the sustainable returns that $HELENA token holders receive. Helena’s protocol is designed to make staking more accessible and sustainable by automating the process and maximizing returns.

Helena has recently renovated all of its tools in order to better serve its users with a new, convenient, and user-friendly web page and dApp developed for the V2.

With its fast yields, impulsive supply control, and the new V2 features, Helena Financial is competent to redefine DeFi 3.0. and we will continue to follow the fate of this protocol in the coming days.

What’s next for DeFi?

The DeFi ecosystem is still in its early stages. However, it is growing at a rapid pace. New protocols and platforms are being launched all the time. As the ecosystem continues to grow, we can expect to see a wider range of services and products being offered. We can also expect to see more users getting involved in DeFi.

DeFi has the potential to change the financial landscape by providing trust-minimized, non-custodial financial services. However, there are still many challenges that need to be addressed before DeFi can truly reach its potential. These include vulnerabilities, the lack of trustworthiness, and regulatory uncertainties. Despite these challenges, DeFi is a promising area of development and one to watch in the coming years.

We hope that this article has been helpful and informative for you. Be sure to dig more into DeFi’s world of limitless innovations and fundamentals to understand both today and the future better.

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