What is DeFi?
DeFi means decentralized finance — banking, trading, and lending built on smart contracts instead of banks. Open, global, 24/7, and risky.
DeFi stands for decentralized finance: financial services built on smart contracts rather than companies. Anyone with a wallet and an internet connection can use it.
The major categories:
- DEXs (decentralized exchanges) — Like Uniswap, Curve, or Raydium. You swap tokens directly from your wallet, no account, no KYC, no waiting. Liquidity is provided by other users earning fees.
- Lending & borrowing — Platforms like Aave or Compound let you deposit crypto to earn yield, or borrow against it with no credit check. Over-collateralized, so liquidations happen automatically if your collateral drops.
- Stablecoins — Tokens like USDC, USDT, or DAI that hold a 1:1 peg to the US dollar. They power most DeFi activity.
- Yield farming — Strategies that combine lending, swapping, and providing liquidity to earn outsized returns. High yield often = high risk.
Why use DeFi instead of a bank? Speed (settlement is seconds, not days), access (you don't need credit history or an address), composability (protocols plug into each other like Lego), and self-custody (you control your assets — no Mt. Gox or FTX freezing your funds).
The risks are real: smart contract bugs, oracle manipulation, governance attacks, impermanent loss for liquidity providers, and very limited recourse if something goes wrong. Stick to audited blue-chip protocols, never deposit more than you can afford to lose, and avoid hype-of-the-week farms.