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
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- VolatilityHow much and how quickly an asset's price moves, in either direction.
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