DeFi

DeFi is short for decentralized finance, a new system that has arisen to compete with the traditional centralized financial system. A centralized financial system has companies and institutions like banks and stock markets owned and controlled by companies that control transaction and asset data.In a decentralized financial system, a network of peers maintains the records of transactions and controls the institutions.

Decentralized finance can take many forms, from simple and mundane to very sophisticated and complex. Leveraged delta neutral options trading is available on decentralized platforms, along with the opportunity to trade cryptocurrencies peer to peer as if you were on a stock market, without the market owner charging you a premium and having the power to corrupt the outcome. Recently, stock trading platform Robinhood halted sell trading on Gamestop while allowing buy trading - and got away with it. So this risk is not just hypothetical. Centralized exchanges can and do cheat users.

But DeFI does not have to be borrowing, lending, automated yield-farming, or buying and selling crypto. When you think about it, when you just hold BTC in a wallet, that is finance, and it is decentralized. Decentralized systems can offer every function that centralized systems offer today.

Why is DeFI relevant to the Network State?

A censorship-resistant, decentralized way for people to conduct economic activity gives Network States a technological starting point that robustly protects freedom. Absolute freedom is maybe not a good thing, but DeFI provides it. It is up to citizens to decide how much of this freedom to yield in their opt-in social contract with each other in a government system created and run by and for peers.