In theory, the implosion of FTX should have acted as a catalyst for the adoption of decentralized finance.
What is DeFi?
DeFi uses a technology-driven blockchain ecosystem to bypass traditional financial services management systems and processes, or "middlemen." It achieves this by using digital wallets, smart contracts or digital agreements, and oracles.
As a decentralized system, DeFi has a financial infrastructure that runs on multiple computer networks that serve as public ledgers that store digital copies of transactions, and it uses dApps (decentralized applications) to do this. It is based on the use of blockchain and layer1s, such as Ethereum ( ETH-USD ) , BNB Chain ( BNB-USD ), Positron ( TRON-USD ), Avalanche ( AVAX-USD ), Solana ( SOL-USD ) , and others to create financial contracts, as with traditional finance. The supposed advantage of DeFi is that the technology is decentralized and adds transparency to various trading and leverage services. The second level consists of two main players: decentralized exchanges and decentralized depository/lenders. DEXs (decentralized exchanges) allow traders to exchange digital assets, similar to how they would on a CEX (centralized exchange). Decentralized deposits/lenders ("liquidity providers") allow users to deposit digital resources into the protocol in exchange for a return or allow them to deposit resources as collateral (collateral) to borrow other crypto resources.
An example of a decentralized transaction
Antony has a many Bitcoin, transfers it into Wrapped Bitcoin ("WBTC") to get an exchangeable resource on decentralized circuit. They then deposit that WBTC as collateral on a decentralized protocol borrows stablecoins. Antony then decides to deposit stablecoins on a CEX and exchange them for normal fiat currency, which he can withdraw from their bank to use in daily expenses.
Julia, on the other hand, has many ethers and deposits them as collateral in Aave to borrow more stablecoins. Then the latter are traded on Uniswap ( UNI-USD ) for other tokens. So he leveraged ETH as collateral to buy a number of equity/governance tokens.
DEX as a trading platform
Over time, DeFi also evolved in the direction of speculative trading by leveraging decentralized financial dynamics to offer traders a custody risk-free instrument on which to trade. Examples of this are the dYdX and GMX platforms that allow leveraged trading in derivative instruments in a decentralized manner with acceptable liquidity. Trading can be done in many ways: scalping, intraday, swing.
Unfortunately, DEXs do not have trading books yet liquid and full enough to consider these platforms for scalping or intraday trading however they can be used for multiday trading.
