{"id":28107,"date":"2026-07-30T09:00:05","date_gmt":"2026-07-30T07:00:05","guid":{"rendered":"https:\/\/my-life.lu\/?p=28107"},"modified":"2026-06-11T11:19:06","modified_gmt":"2026-06-11T09:19:06","slug":"understanding-decentralised-finance-30168","status":"publish","type":"post","link":"https:\/\/my-life.lu\/en\/understanding-decentralised-finance-30168\/","title":{"rendered":"Understanding decentralised finance"},"content":{"rendered":"

Can you imagine borrowing, earning interest or carrying out transactions without going through a bank? Surprising, isn\u2019t it? Yet this is precisely the principle of decentralised finance (DeFi). This approach, which is notably based on the blockchain<\/strong><\/span><\/a>, opens up new perspectives that raise questions. However, it remains complex and involves risks. myLIFE gives you a few keys to better understand what it is all about and to help you form your own opinion.*<\/p>\n

It is during a discussion with friends that Olivier first hears about decentralised finance: innovative technology, accessibility, absence of intermediaries, transparency, speed, etc. While the advantages seem numerous, the young man in his thirties remains cautious in the face of his friends\u2019 enthusiasm. Behind these promises of freedom and savings, he wonders how such a system works and about the security of transactions. Here are a few explanations to help him see things more clearly.<\/p>\n

What is decentralised finance?<\/h2>\n

Decentralised finance, or DeFi, refers to an ecosystem of financial services based on blockchains and cryptoassets (cryptocurrencies, tokens, etc.). Its distinctive feature: operating without traditional intermediaries such as banks, financial institutions, brokers or insurers. Transactions are carried out directly between users and are executed automatically, according to rules defined in advance, thanks to autonomous computer programs known as smart contracts.<\/p>\n

DeFi provides access to financial services without relying on local institutions. It may in particular constitute an alternative for people who do not have access to traditional banking services, provided they have an Internet connection and are able to use digital tools.<\/p>\n

How does DeFi work?<\/h2>\n

In order to understand how DeFi works, a few basic concepts need to be clarified.<\/p>\n

Decentralised finance is based on blockchain<\/strong><\/span><\/a>, notably on networks such as Ethereum. A blockchain is a decentralised and secure database distributed across a network of computers worldwide. It makes it possible to record transactions in a permanent and transparent manner, rather like a large ledger accessible to everyone. The information is continuously updated and replicated across the entire network.<\/p>\n

Cryptoassets<\/strong> (cryptocurrencies, tokens, etc.) are digital assets. On a blockchain, they can serve as a means of payment, a store of value or represent rights or financial assets. Among them, stablecoins are cryptoassets whose value aims to remain close to that of a reference asset, such as a currency. They are often used as a reference value in DeFi.<\/p>\n

To interact with DeFi, it is necessary to have a wallet<\/strong>, a digital wallet that allows the management of cryptographic keys giving access to owned assets. It is notably used to receive, send and sign transactions.<\/p>\n

In decentralised finance, operations are managed by protocols (a set of IT rules) and smart contracts<\/strong> recorded on a blockchain. These programs automatically execute predefined actions (management of deposits, calculation and payment of interest, etc.) when certain conditions are met. They make it possible to automate financial services, partially replacing traditional intermediaries.<\/p>\n

Finally, DeFi encompasses a wide variety of decentralised financial applications, known as dApps<\/strong> (decentralised applications). These interfaces, similar to standard web or mobile applications, allow users to interact with smart contracts to carry out their transactions.<\/p>\n

Together, these elements form an ecosystem that operates without a central authority, in which each user is responsible for managing their own assets.<\/p>\n

DeFi offers alternative digital financial services. While some operate in a way comparable to traditional services, others are specific to this ecosystem and rely on new mechanisms.<\/p><\/blockquote>\n

What is decentralised finance used for?<\/h2>\n

Anyone wishing to exchange, borrow, save or invest without going through the traditional banking system can in theory turn to decentralised finance. It provides access to a wide range of services offered by financial institutions and also delivers new ones.<\/p>\n

In concrete terms, Olivier could carry out various financial operations directly from his wallet. Here are a few examples of applications offered by DeFi:<\/p>\n