Defining decentralized finance as a type of finance that relies on blockchain technology, smart contracts, and decentralized applications (dApps) in order to provide financial services such as lending, trading, and investment without intermediaries and in an open and transparent manner.
There has been a DeFi initiative for quite some time, but it really took off in the summer of 2020 – when borrowing and lending platform Compound introduced its COMP governance token, which it used to reward its users in a process known as liquidity mining.
By rewarding farmers in COMP, yields could be significantly increased, more advanced farming strategies made possible, and token holders were able to participate in governance. In response to other protocols mimicking DeFi’s concept, users piled into DeFi, token prices soared, and DeFi activity in general exploded.
Reference:
Rudick, B. (2021, August 13). DeFi Summer 2.0: Don’t Call it a Comeback. GSR Markets. https://www.gsr.io/insights/chart-of-the-week-defi-summer-2-0-dont-call-it-a-comeback/
