What Is DeFi?
Decentralized Finance (DeFi) refers to a set of financial services — including lending, borrowing, trading, and earning interest — built on blockchain networks and governed by smart contracts rather than banks or other intermediaries.
How DeFi Differs from Traditional Finance
- No central authority: Protocols are governed by code and token holders, not a corporation.
- Permissionless: Anyone with a crypto wallet and internet access can participate.
- Transparent: All transactions are recorded on a public blockchain.
- Non-custodial: Users retain control of their own assets.
Key DeFi Applications
- DEXs (Decentralized Exchanges): Trade crypto without a centralized platform (e.g., Uniswap).
- Lending protocols: Borrow and earn interest (e.g., Aave, Compound).
- Yield farming: Earn returns by providing liquidity to DeFi protocols.
- Stablecoins: Crypto assets pegged to fiat currencies (e.g., DAI).
Risks to Consider
DeFi protocols carry smart contract bugs, liquidity risk, and regulatory uncertainty. Always research thoroughly before committing capital.
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