Glossary
DeFi
DeFi, short for decentralized finance, is a set of financial services — such as lending, borrowing, trading, and saving — built on public blockchains and run by open code rather than by banks or brokers. Anyone with a compatible wallet can use it without asking a central institution for permission.
The close-up. DeFi replaces the traditional middleman with a smart contract — a program deployed on a blockchain that executes automatically when its conditions are met. Instead of a bank matching lenders and borrowers, users deposit assets into shared pools of capital, and the code sets the rules for how funds move, what collateral is required, and how interest accrues. Because these contracts are open source and run on a public blockchain, anyone can read the code and verify the transactions. Common building blocks include lending markets, decentralized exchanges that let people swap tokens directly, and stablecoins used as a steady unit of account.
The wide shot. DeFi's guiding idea is that financial services can be permissionless, transparent, and composable — different applications can be plugged together like building blocks, since they share the same open infrastructure. That openness is also where the risks live: a flaw in a smart contract, a mistake by the user, or a poorly designed protocol can lead to lost funds, and there is often no central party to reverse a transaction. Custody typically rests with the user rather than an institution.
Understanding DeFi means holding both lenses at once: the precise mechanics of code and collateral, and the broader question of what it means to move value without gatekeepers. Explore live assets and tools to see these ideas in context, and always do your own research.