DeFi (decentralized finance)

DeFi, short for decentralized finance, is a category of financial services built on public blockchains. It covers activities such as lending, borrowing, trading, and saving, and it runs on smart contracts instead of banks or brokers. People use these services directly through apps and crypto wallets.

In a DeFi system, the rules of a service are written into open-source code that runs on a blockchain. When someone lends, borrows, or swaps an asset, the smart contract carries out the transaction and records it on-chain. Many DeFi protocols are non-custodial, which means the code holds the funds and no single company moves them at will.

DeFi carries risk. Smart contracts can contain bugs, and interest rates and asset prices can move quickly. Because there is often no intermediary to reverse a transaction, mistakes can be hard to undo. Users are responsible for their own keys and their own decisions.