Let's talk about the importance of Smart Contracts in the DeFi system

Before outlining some key points about the importance of smart contracts in the DeFi system, I would first like to make mention of the previous step that made possible the arrival of Smart Contracts in the economic and financial world developed through blockchain protocols.

It is important to note that after the creation of the first blockchain protocol associated with Bitcoin, which was launched in 2009, since then thousands of projects have been created with cutting-edge technology that, in addition to providing new ideas and technological solutions, have also paved the way for a new decentralized economic and financial model that is currently gaining ground over traditional centralized processes and applications.

Having said this, you will understand that Smart Contracts basically aim to eliminate intermediaries from traditional centralized processes and applications, with the firm purpose of providing automated processes that simplify the execution of financial operations, and at the same time offer users conditions that allow them to save resources in terms of operating costs.

Now, to better understand what a Smart Contract is, the first thing to do is to have a clear understanding of what a "Contract" means, meaning an agreement between two or more parties, i.e. a contract is nothing more than an agreement where they stipulate or define what can be done, how it can be done, what happens if something is not done.

In other less technical words, a contract is an instrument where a series of rules are stipulated that allow the interested parties to determine whether or not to agree to enter into one or several operations, in this case of economic and financial importance, with the objective that the parties involved respect the criteria set forth.

In this sense, Smart Contracts are digital instruments that run on the blockchain, therefore, they are self-executing and programmable agreements that allow the execution of value transactions under special conditions, where;

A) One or several persons can develop a decentralized DeFi platform and program smart contracts and offer services for trading of tokens, cryptocurrency savings, loans and other financial services that run on the cryptocurrency market.

B) And where one or several people can access a certain DeFi platform and execute smart contracts, which offers them the possibility to execute financial transactions without the intermediary of traditional banking, namely; buy and inject liquidity to certain pairs of certain cryptographic assets, and then sell these shares without any restrictions, or otherwise freeze our resources in savings mode in exchange for better interest rates than we would normally get in traditional banking.

In closing, I should mention that on our HIVE blockchain the folks at @leofinance launched CubDefi which is a novel and cutting edge application already running on the blockchain as a decentralized exchange platform, providing the fundamental attributes of security, expandability, with quite attractive interest rates through highly flexible smart contracts similar to existing DeFi linked financial services today.

Defi.Tech A Brief Introduction to Smart Contracts. Link

The cover image was designed by the author: @lupafilotaxia, incorporating image: Salmanzafar.me