Decentralized finance (DeFi) refers to an open and programmable financial system based on smart contracts that allows users to participate in economic activities without intermediaries.
Smart contracts refer to self-executing computer programs stored on a permissionless blockchain. Each protocol on the DeFi is made up of smart contracts working together. This differs significantly from traditional financial transactions – smart contracts do exactly what the user coded and can include a conditional element.
DeFi can help unlock the value of NFTs by using it as collateral for lending, especially high-value NFTs that today cannot be unlocked without an outright sale. The fractionation of NFTs also brings more liquidity by combining them with tokens that can be traded in peer-to-peer liquidity pools.
DeFi use cases could include any financial/economic transactions currently being conducted in the traditional world.
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