What is DeFi?
Decentralised finance: lending, trading and other financial services provided by smart contracts rather than by companies.
DeFi replicates familiar financial functions — borrowing against collateral, exchanging assets, earning yield on deposits — using code that anyone can use without permission or identification.
Why it matters: it removes gatekeepers, and with them the protections gatekeepers provide. There is no deposit insurance, no fraud reversal and no counterparty to sue. Losses come from contract exploits, oracle manipulation, sudden liquidation, and yields that are actually paid in freshly issued tokens. A high advertised return in DeFi is a description of risk.
Related terms
- Smart contractA program stored on a blockchain that runs exactly as written when its conditions…
- LiquidityHow easily an asset can be bought or sold in size without moving its…
- Seed phraseA list of ordinary words, usually twelve or twenty-four, that encodes every private key…
- StablecoinA crypto token designed to hold a steady value, usually one US dollar, so…
- LiquidationThe forced closure of a leveraged position by an exchange or protocol when the…
- BlockchainA shared, append-only ledger of transactions that many independent computers hold copies of and…
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