TL;DR Breakdown Decentralized Finance is a collective term for commodities offered on the blockchainRegulating DeFi is tough What is Decentralized Finance (DeFi), and how does it work? Decentralized Finance is a collective term for commodities offered in digital platforms without financial intermediaries in crypto markets. The absence of involvement of central financial intermediaries means that the digital platform is available for everyone and does not involve financial statements from institutions and blockchain. With smart contracts instead of traditional financial statements, investors are at an advantage of borrowing, lending, and earning interest on digital assets invested using DeFi. Defi enables anybody to trade and invest in digital assets as long as one is connected to the internet. Regulating DeFi Considering that the system is decentralized, regulating it is hard. Around $60b is locked in Decentralized Finance; hence, it is necessary to control the activities happening in the platform for the security of investors and their assets. However, unlike traditional forms of investment where the Finance is centralized, no statements are offered to prove the transaction. This is because the digital platforms do not fit the pract5icallity of traditional financial transactions. Challenges faced when regulating DeFi Classifying digital assets Digital assets are available in different types and forms. They are the item...
