Decentralized finance (DeFi) development exploded in 2021, along with crypto prices and Ethereum adoption. Bianco Research, LLC President Jim Bianco joins Yahoo Finance to discuss what Decentralized Finance (DeFi) means and how it can be applied.

Video Transcript

- Decentralized Finance is what DeFi is short for. What it basically means is that we are creating a bunch of what they've referred to as protocols. And those protocols are computer-driven programs called smart contracts that will execute on trading, lending, borrowing, insurance, lotteries, and the like.

So we've taken your local bank and we've turned it into a computer program that runs automatically. So when you enter into the DeFi space, you buy some cryptocurrencies, like Ethereum, you put them on an electronic wallet. And then you connect to one of the protocols like a trading dex-- that's short for decentralized exchange-- like Uniswap.

You can trade your coins. You can exchange your Ethereum for anything else. They've got tens of thousands of pairs out there that you can trade it to. And it's all done by computer code.