Getting Started with Blockchain What is DeFi (Decentralized Finance) that has been hotly debated recently?

Below, through the well-known DeFi on the Ethereum network – Maker DAO, help everyone understand the operation of DeFi.

We can simply understand Maker DAO as a decentralized bank that can issue its own stable currency – Dai, Dai and the dollar 1:1 anchor.

One of the most important businesses in traditional financial services is lending. Assume that the cryptocurrency investor Zhang Sanquan bought a house and met a true love plan to get married, but did not have the money to do a wedding, and planned to go to a bank loan. The bank will investigate Zhang San’s credit history and use Zhang’s assets (such as a house) as collateral to be loaned to him.

How to achieve this in the decentralized "Bank" Maker DAO? In fact, it is very simple, Maker DAO does not need to check Zhang San's credit record, or even know that he is Zhang San (anonymity of the blockchain). Maker DAO will ask Zhang San to mortgage the blockchain assets, assuming that Zhang San has $ 50,000 worth of ETH, all of which are mortgaged to Maker DAO through smart contracts , and Maker DAO will give Zhang three up to 100,000 Dais (worth $100,000). Because Maker DAO stipulates that the value of the collateral is at least 1.5 times the amount of the loan. With Dai, Zhang San can be converted into legal currency (such as US dollars) for use in life.

After waiting for Zhang San, he can buy Dai in the market, pay Maker DAO and pay interest, and redeem the mortgaged ETH assets. Assuming the market fell, Zhang San’s original ETH worth $150,000 has shrunk, which is already 1.5 times lower than the loan amount. Maker DAO will force Zhang San’s ETH to repay his loan, ensuring that Maker DAO itself “does not Will go bankrupt."