DeFi
A blockchain-based financial ecosystem that lets people lend, borrow, trade, and earn yield without traditional banks or brokers.
DeFi, short for decentralized finance, refers to financial services built on public blockchains using smart contracts instead of traditional intermediaries such as banks, brokerages, or payment processors. These services can include decentralized exchanges, lending markets, stablecoins, derivatives, and yield strategies. Users typically connect a crypto wallet to an application and interact directly with code that manages deposits, trades, collateral, and repayments.
DeFi matters because it makes financial tools more open and programmable: anyone with an internet connection and compatible wallet can use many protocols, and developers can build new services on top of existing ones. For example, a user might deposit crypto into a lending protocol so others can borrow it, with interest rates set by supply and demand. Compared with a traditional bank loan, DeFi can be faster and more transparent, but it also carries risks such as smart contract bugs, volatile collateral, liquidation, and scams.
Other terms in DeFi
AMM
An automated market maker is a DeFi protocol that uses liquidity pools and algorithms to price and swap crypto assets without a traditional order book.
Aggregator
A DeFi service that searches multiple protocols to find better prices, routes, or yields for a user’s transaction.
DEX
A decentralized exchange is a crypto marketplace where users trade directly from their wallets using smart contracts instead of a central intermediary.
Flash Loan
A flash loan is an uncollateralized DeFi loan that must be borrowed and repaid within the same blockchain transaction.