Crypto glossary
DeFi (decentralized finance)
DeFi, or decentralized finance, covers lending, trading and saving services that run on blockchain smart contracts instead of banks or brokers.
DeFi is the umbrella term for financial applications built on public blockchains, mainly Ethereum and compatible networks. Instead of a bank or exchange holding customer money, smart contracts hold the funds and execute the rules automatically: who can borrow, at what rate, and what happens if collateral falls in value.
Anyone with a crypto wallet can use these protocols without opening an account or passing identity checks, and the code and transactions are visible on-chain. Core building blocks include decentralized exchanges, lending markets, stablecoins and liquid staking, which can be combined with each other, a property often called composability.
The trade-off is that users carry the risks themselves. Bugs in smart contracts, manipulated price oracles, compromised bridges and governance attacks have caused losses of billions of dollars over the years, and there is usually no customer support or deposit insurance to recover funds.
Example
A user deposits ETH into a lending protocol such as Aave, borrows USDC against it and swaps part of that USDC on Uniswap, all from the same wallet and without any intermediary approving the operations.
Related terms
Latest articles on DeFi
- What are the Best DeFi Platforms to Stake my Cryptocurrencies in 2025?
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