IMPORTANT OF DECENTRALIZED FINANCE IN BLOCKCHAIN TECHNOLOGY
◼️◼️◼️ Blockchain is the collection of record linked with each other with strongly resistance to alterations protected by cryptography. As a collection of data or record it can not use it self with out someone using it, it's need users to makes transaction in other to store information, with the help of DeFi this process work effectively because it's bring costumes and offer services to them. now let dive into the important of DeFi in Blockchain.
🏬what is DeFi?
DeFi provide the most popular infractuture in web3 (Blockchain) which provides
tools such as swapping and lending, borrowing and yielding and farming token, it's like a power house in web3.
DeFi help Blockchain functional by giving financial services like;
1. smart contract
2. lending and borrowing
3. yielding and farming token
1.SMART CONTRACT
What is smart contract and it's important in web3
Smart contract is the programming or coding that was design for a specific tasks.
in Blockchain smart contract is a piece of code put together to achieve a specific goal it's a tools in DeFi used instead of a middleman.
IMPORTANT OF SMART CONTACT
Smart contract is essential, it is one of the component of Blockchain technology that makes it web3 decentralized.
It is important in executing tasks.
it's coded to perform a specific tasks like DAO etc.
2. LENDING AND BORROWING.
Lending and borrowing are very important in Web3 because they are the foundation of decentralized finance (DeFi) a core part of the Web3 ecosystem.
Here’s why they matter:
1. Capital Efficiency
Lenders earn passive income by putting their crypto to work (earning interest).
Borrowers can use crypto without selling their assets — they just deposit collateral and borrow against it.
This helps keep liquidity flowing in the Web3 economy.
2. No Middlemen
In Web3, lending and borrowing happen through smart contracts — not banks.
This means global access, 24/7, with lower fees and greater transparency.
3. Use of Collateral
You can lock up crypto (like ETH or BTC) as collateral and borrow stablecoins (like USDC) to use for:
Trading,Staking,Yield farming,Real-world spending
4. Financial Inclusion
Anyone with a crypto wallet can lend or borrow — no need for bank accounts, credit checks, or IDs.
This helps people in countries with weak banking systems.
5. Building Blocks for dApps
Lending/borrowing platforms (like Aave, Compound, Venus) act like money markets.
Other Web3 projects (NFTs, games, DAOs) can integrate them to build more powerful applications.
6. Earn and Grow Wealth
Lenders earn interest.
Borrowers can use leverage (borrow to invest more) — but this carries higher risk.
3. Yielding and farming token.
In Web3, yielding and farming tokens are essential mechanisms used in decentralized finance (DeFi) to earn passive income and improve liquidity in blockchain ecosystems.
1. Yielding (Yield Farming):
Yield farming involves locking up cryptocurrencies in DeFi protocols to earn rewards, usually in the form of additional tokens. This helps users grow their assets over time without actively trading. It's important because it incentivizes users to support protocols by providing liquidity or staking assets.
2. Farming Tokens:
Token farming rewards users for supplying liquidity to decentralized exchanges (DEXs) or lending platforms. By farming tokens, users help maintain the health and efficiency of DeFi platforms. These tokens often have governance rights or can be traded for profit.
Importance:
1.Encourages user participation and network growth.
2.Provides liquidity to decentralized platforms.
3.Allows users to earn passive income.
4.Supports the decentralization and stability of Web3 financial systems.
Overall, Smart contract, Lending and borrowing, yielding and farming are vital tools for the sustainability and expansion of the Web3 ecosystem.
