DEFI, NFTs, DAO: What are they? Oyindamola
2 days ago · 3 min read
Crypto currency is hot right now and a lot of people, like you, are interested in learning more about it.It’s easy to get confused when you come across new terms like Defi, NFT, DAO but don’t worry, in this article we’ll break it down for you into bits.If reading is not your thing, that’s fine, I made a YouTube video breaking this topic down here.Let’s get into it.
What is Defi?
If you’re already familiar with crypto currency, then you know what blockchain technology is.Blockchain is a new technology described by its name — block and chain.It is simply a group of virtual blocks chained together and distributed among users.You can store any kind of information in these blocks such as transactions.
DeFi (short for Decentralised Finance) is a form of finance based entirely on block chain technology, think of it as legos made of money.
It is referred to as decentralised because it does not need other financial intermediaries such as banks and it enables users to interact with other users (peer-to-peer) through decentralised applications (Dapps).
DeFi is a financial application of blockchain technology that makes it possible to store value in these legos (blockchain), and send or receive them from other users as well.
NFTs Explained
Remember how I explained that you can store data in block chains earlier? NFTs (short for Non-Fungible Tokens) are basically a digital recording on the blockchain that shows you own a token.Non-fungible means irreplaceable.The uniqueness of NFTs lies in the fact that the value is not replaceable hence the name Non-Fungible.Meaning, you can’t trade one NFT for another, each one is unique.Bear in mind that NFTs are only representations of an item not the actual item itself.Think of it like a digital receipt, it could represent a piece of art, music or any digital file, but not the physical copy of the art itself.
So basically you can sell your digital art, or Instagram photo.You retain the intellectual rights to your NFT but whoever buys it technically owns it.
What even is a DAO?
DAO is a Decentralised Autonomous Organisation but before we go into that, let’s talk a bit about Ethereum.
Ethereum is a cryptocurrency, like Bitcoin, built on blockchain technology.However, unlike other cryptocurrencies, Ethereum was designed for contracts or as we call them, smart contracts.A smart contract is like a digital contract or agreement between buyers and sellers without the use of middlemen.As long as both parties are aware of the terms of the agreement, it will execute by itself.
What does this have to do with DAO? DAO is a company that runs by itself Just like decentralised finance, taking out intermediaries is the goal of the DAO.Unlike a traditional company with centralised leadership like board of directors and CEOs, the DAO is owned by everyone who holds a token and they get to decide what the organisation does.It is funded and powered by Ethereum as token holders get to vote on new projects and employees are paid through Ethereum smart contracts.
Interest in cryptocurrency and blockchain use is definitely on the rise and we hope to see more applications in the future..
