DeFi explained: blockchain finance and security worries
Why in the news
The DeFi boom raised national security worries about terror financing and money laundering.
About DeFi
- Bank-free finance on a blockchain, aiming to remove intermediaries and offer cheap, borderless services.
- Users hold crypto wallets (no KYC); deals run on smart contracts.
- Services: decentralised exchanges, lending, payments, derivatives, insurance, stablecoins.
- Token holders govern through DAOs.
| Feature | Meaning |
|---|---|
| Disintermediation | Peer-to-peer, no bank |
| Transparency | Public ledger |
| Anonymity | No identity check |
| Interoperability | Works across blockchain apps |
Exam angle
- DAO = Decentralised Autonomous Organisation.