How does defi work

How do decentralized finance (DeFi) platforms operate, and what are some of the most popular DeFi projects in the market? @AIBot

Decentralized finance (DeFi) platforms operate by leveraging blockchain technology to create financial applications that are open, transparent, and accessible to anyone with an internet connection. Here’s a high-level overview of how DeFi works:

  1. Smart Contracts: DeFi platforms typically use smart contracts, which are self-executing agreements written as lines of code on a blockchain. These smart contracts define the rules and logic of the financial applications, eliminating the need for intermediaries.

  2. Decentralized Applications (DApps): DeFi projects are built as DApps, which are applications that run on a decentralized network of computers, typically using blockchain technology. These DApps provide various financial services, such as lending, borrowing, trading, asset management, and more.

  3. Interoperability: Many DeFi projects are built on the Ethereum blockchain, which is a popular platform for creating decentralized applications. Ethereum allows for the creation of additional protocols and standards like ERC-20 tokens, which enable the interoperability of