What Is DeFi?
DeFi (Decentralized Finance) = financial services (like lending, borrowing, trading, investing) that run on blockchains without banks or intermediaries.
👉 Instead of a bank, you interact with smart contracts (self-executing code on the blockchain).
🔹 How DeFi Works
- Built on Smart Contracts
- Mostly on Ethereum, but also Solana, Polygon, Avalanche, etc.
- Code runs automatically → no bank clerks or middlemen.
- User Control
- You keep control of your crypto in your wallet.
- You connect your wallet (like MetaMask) directly to DeFi apps.
- Open & Borderless
- Anyone with internet + wallet can access DeFi services worldwide.
🔹 Examples of DeFi Services
- Lending & Borrowing: Deposit crypto to earn interest, or borrow using your crypto as collateral (e.g., Aave, Compound).
- Decentralized Exchanges (DEXs): Swap tokens directly with others (e.g., Uniswap, PancakeSwap).
- Stablecoins: Crypto tied to fiat currency for stability (e.g., USDT, USDC, DAI).
- Yield Farming & Liquidity Pools: Provide liquidity to earn fees + rewards.
- Insurance, Derivatives, Asset Management — all run on blockchain.
🔹 Benefits of DeFi
No banks → more control, fewer middlemen.
Accessible worldwide (just need a crypto wallet).
Transparent (all transactions are public on blockchain).
Often higher returns (but higher risk).
🔹 Risks of DeFi
❌ Smart contract bugs → funds can be hacked/stolen.
❌ Very volatile → collateral can be liquidated fast.
❌ Scams & “rug pulls” in some projects.
❌ No regulations or protections like in banks.
Quick Summary
DeFi = a new financial system on blockchain where you can lend, borrow, trade, and earn interest without banks — just smart contracts and your crypto wallet.
What are NFTs and how do they work?
What Are NFTs?
NFT = Non-Fungible Token
- A unique digital asset stored on a blockchain.
- Unlike Bitcoin or dollars (which are fungible — 1 BTC = 1 BTC), each NFT is one of a kind.
- Think of NFTs as digital certificates of ownership for art, music, videos, game items, or even real-world assets.
🔹 How NFTs Work
- Created (“Minted”) on a Blockchain
- Mostly on Ethereum, but also Solana, Polygon, Flow, etc.
- Each NFT has a unique ID stored in the blockchain.
- Represents Ownership
- NFT doesn’t always hold the actual file (like a picture or song).
- Instead, it points to the file + proves who owns it.
- Bought & Sold on Marketplaces
- Platforms like OpenSea, Blur, Rarible let people trade NFTs.
- Payments are usually in crypto (ETH, SOL, etc.).
- Smart Contracts Control NFTs
- Set rules like royalties for the creator (they earn % every resale).
🔹 Examples of NFTs
- Digital Art (Beeple’s artwork sold for $69M).
- Collectibles (CryptoPunks, Bored Ape Yacht Club).
- Gaming Items (weapons, skins, virtual land in games).
- Music & Videos (exclusive albums, concert tickets).
- Real Estate & Identity (tokenized property, digital certificates).
🔹 Benefits of NFTs
Prove ownership of digital goods.
Enable artists/creators to sell directly without middlemen.
Can program royalties into sales.
Open up new markets (gaming, virtual worlds, metaverse).
🔹 Risks of NFTs
❌ Speculative → many NFTs lose value quickly.
❌ Scams, rug pulls, fake collections.
❌ File storage issue (image may not live on blockchain, only the proof does).
❌ Environmental concerns (on Proof of Work blockchains).
Quick Summary
NFTs = unique digital tokens that prove ownership of digital (or real) assets, powered by blockchain. They’re like owning an autographed trading card, but digital — you can buy, sell, and trade them online.