What Is DeFi

Rebuilding Financial Services Without Banks

What Is DeFi (Decentralized Finance)?

Decentralized Finance, commonly known as DeFi, refers to financial services built on blockchain technology without traditional banks or intermediaries.

Instead of relying on banks, brokers, or financial institutions, DeFi uses smart contracts to provide services such as:

Lending
Borrowing
Trading
Earning interest

All of this happens directly on blockchain networks.

How DeFi Works

DeFi applications operate through smart contracts on blockchains like Ethereum.

Here’s how it typically works:

1️⃣ A user connects a crypto wallet.
2️⃣ The user interacts with a decentralized application (DApp).
3️⃣ Smart contracts automatically execute transactions.
4️⃣ No bank or central authority is involved.

Everything is automated and transparent.

Common DeFi Services

🔹 Decentralized Exchanges (DEX)

Users trade crypto directly from their wallets.

🔹 Lending and Borrowing Platforms

Users lend assets to earn interest or borrow against collateral.

🔹 Yield Farming

Users provide liquidity and earn rewards.

🔹 Stablecoin Protocols

Used to maintain stable digital currencies.

Advantages of DeFi

No intermediaries
Global accessibility
Transparent smart contracts
Potential for higher returns
24/7 availability

Anyone with internet access can participate.

Risks of DeFi

Smart contract vulnerabilities
Platform hacks
Market volatility
Regulatory uncertainty
Complex user experience

DeFi offers innovation, but it requires careful understanding.

DeFi vs Traditional Finance

Traditional Finance	DeFi
Banks control funds	Users control funds
Limited hours	24/7 operation
Requires approvals	Permissionless access
Centralized authority	Smart contract automation