DeFi (Decentralized Finance)
A financial ecosystem built on blockchain technology that operates without traditional intermediaries like banks, brokers, or exchanges, using smart contracts instead.
DeFi, short for Decentralized Finance, refers to a ecosystem of financial applications built on blockchain networks — primarily Ethereum — that operate without centralized intermediaries. Instead of relying on banks, brokerages, or exchanges, DeFi uses smart contracts to automate financial services including lending, borrowing, trading, insurance, and yield generation. Key DeFi protocols include Uniswap (decentralized exchange), Aave (lending and borrowing), Lido (liquid staking), and Maker/Sky (decentralized stablecoin). As of 2026, DeFi protocols collectively hold over $125 billion in total value locked (TVL). The key advantages over traditional finance: permissionless access (anyone with an internet connection can participate), transparency (all transactions and protocol rules are publicly verifiable on-chain), self-custody (users maintain control of their assets), and composability (protocols can be combined like building blocks). The key risks include smart contract vulnerabilities, regulatory uncertainty, and the complexity that makes DeFi inaccessible to many potential users without education.