DeFi stands for Decentralized Finance. It refers to a broad category of financial applications built on blockchain networks—primarily Ethereum—that aim to recreate and improve upon traditional financial services without banks, brokers, or other centralized intermediaries.
DeFi applications are powered by smart contracts, which automatically execute transactions according to coded rules. This means anyone with an internet connection and a crypto wallet can access financial services, regardless of their location or banking status.
Popular types of DeFi applications include:
- Decentralized exchanges (DEXs) – Platforms like Uniswap that let you trade tokens without a central authority. See DEX.
- Lending and borrowing – Protocols like Aave and Compound let you earn interest on deposits or borrow against your crypto.
- Staking – Locking up tokens to earn rewards and help secure a network. See our staking guide.
- Yield farming – Providing liquidity to protocols in exchange for token rewards.
- Stablecoins – Dollar-pegged tokens essential for DeFi trading. Learn more in our stablecoin guide.
While DeFi offers exciting opportunities, it also carries risks including smart contract bugs, liquidity issues, and regulatory uncertainty. Always do your own research before depositing funds.
Read our complete DeFi beginner's guide for a deeper introduction.