What is DeFi?

DeFi, or decentralized finance, is an open and permissionless financial ecosystem built on blockchain technology and smart contracts with the goal of enabling users to access financial services like trading, lending, borrowing, and yield generation, all without relying on traditional intermediaries like banks, financial advisors, and brokers.

By leveraging smart contracts and decentralized protocols, DeFi is able to offer greater transparency, composability, and global accessibility, allowing anyone with an internet connection to participate in a truly borderless financial system.

DeFi is the future of finance, and fly is here to help bring it to everyone.

Core Components of DeFi

Bridges

Primarily, a bridge for cryptocurrency provides a way to transfer a token between two different blockchains without the need for a third-party intermediary.

A smart contract is used to create a two-way peg between two different chains by locking up or burning (destroying) a token on one blockchain in exchange for an equivalent amount of the same token or asset on the other blockchain. This is done so that the amount of said asset or token does not change, and the user can freely transfer assets between the two blockchains without the need for a third party.

Once the token is bridged/transferred to the new chain, it can be used just like any other token: to swap, provide liquidity, farm, etc.

DEXs

A DEX is a decentralized exchange. They are blockchain-based trading platforms that allows users to trade cryptocurrencies directly with one another, generally through an automated-market maker or order book, without the need for a central authority or intermediary. Users retain full control of their assets at all times as trades are executed directly from their wallets, giving users privacy and reducing risk.

Liquidity Aggregation

Liquidity aggregation automated the process of searching multiple DEXs simultaneously so users could get better rates and execute trades accordingly. Additionally, they provided users with governance tokens and incentivized liquidity providers, which helps to foster a growing DeFi community. Without liquidity aggregation, users have to pour through hundreds of protocols to find the tokens and liquidity needed to make their swaps.