Instead of banks and lawyers, people rely in decentralized finance on a programmable piece of code called a smart contract. Smart contracts are written and recorded on the blockchain whenever a transaction happens, and users could trace transactions and approve the ownership of an item by verifying the smart contracts’ history. The contract executes on certain conditions, making it a secure medium for transactions that make them private.
“The financial system is basically sending money around with various terms and conditions attached to it,” said Joey Krug, Chief Investment Officer at Pantera Capital, a cryptocurrency and blockchain-focused asset manager.
Nonetheless, with the increase of DeFi-related cyber-crimes, developers and crypto businesses should reinforce their systems to keep their users secure, especially that DeFi is still in its infancy, and with the rising scams and thefts, the cryptocurrency might lose its charm.
