Decentralized Finance (DeFi)
Also known as: Open Finance, Permissionless Finance, Crypto Financial System
A financial ecosystem built on blockchain that offers services like lending, trading, and yield generation without intermediaries.
Decentralized Finance (DeFi) refers to a collection of financial applications built on blockchain networks that replicate or improve upon traditional financial services—such as lending, borrowing, trading, and asset management—without relying on centralized institutions. Instead, DeFi relies on smart contracts, open-source protocols, and permissionless access. Key components include decentralized exchanges (DEXs), lending platforms (e.g., Aave, Compound), stablecoins (e.g., DAI), and yield farming. DeFi promotes transparency, composability, and financial inclusion but also introduces risks like smart contract bugs, volatility, and regulatory uncertainty.