What is Finance?
In order to better understand decentralized finance, or DeFi (pronounced dee-fye), we must first introduce traditional finance, or TradFi (pronounced trad-fye), for contrast.
Traditional finance is the legacy system of banks, governments, lending institutions, and capital allocators that provide opportunities to manage money, currency, and capital assets. Money flows through the system allowing people to lend, borrow, deposit, withdraw, and invest. Taxes, debt, financial planning, credit, and investments all fall within the world of finance.
Much of the modern world was built with this structure of raising capital to grow and create. On the other side of the coin - no pun intended - finance is also the source of wealth destruction and loss.
Financial data resides on a central database owned by the company or government agency, meaning they control the data and may not be transparent on how certain methods are being run.