At the end of 2008, a white paper about a decentralized interpersonal electronic payment system—Bitcoin— was sent to the cryptographic mailing list by Satoshi Nakamoto. Bitcoin then came into the world when Satoshi Nakamoto mined the first Bitcoin block on January 3, 2009.
In 2013, Vitalik Buterin, a programmer and co-founder of Bitcoin Magazine, argued that Bitcoin needed a scripting language in order to build decentralized applications. Then he developed Ethereum, a new blockchain based on a distributed computing platform. Ethereum made decentralized applications available on Ethereum networks using smart contract scripting languages such as Solidity and Vyper.
The advent of Bitcoin has enabled transnational transfer of value without a centralized issuer; the emergence of Ethereum and Smart Contract led to the creation of a new financial system that operates without a central entity and protocols.
Traditional financial markets run with the premise that transaction costs and information costs can be reduced by employing financial intermediaries. DeFi challenges the aforementioned premise by replacing those intermediaries with a decentralized automatic system. In DeFi, financial institutions do not interfere in investment. Instead, Smart contract codes automatically execute loans and investments based on the verifiable information accessible on the blockchain network. All evidence of transactions are transparently disclosed on the network.