DeFi

DeFi, short for decentralized finance, is a category of financial applications built on public blockchains that let people trade, lend, borrow, and earn interest without banks or brokers acting as intermediaries. Instead of a company processing your transaction, smart contracts — self-executing programs on chains like Ethereum — hold funds and enforce the rules automatically. Anyone with a wallet and an internet connection can use them, usually without creating an account or passing an identity check.

A concrete example: on the lending protocol Aave, a user can deposit a stablecoin such as USDC into a shared pool and immediately start earning interest paid by borrowers, while another user posts ETH as collateral and borrows from that same pool. No loan officer approves anything; the contract's code sets the rates and enforces repayment terms.

A common misconception is that DeFi is simply crypto trading — in reality it covers a whole stack of services, including lending, derivatives, insurance, and asset management. The trade-offs are real: there is no customer support line, transactions are irreversible, and bugs in a contract can lead to loss of funds. DeFi removes gatekeepers, but it also removes the safety nets that traditional finance provides, so users carry more responsibility for their own security and decisions.