Glossary
What is DeFi?
In one sentence
DeFi — decentralised finance — is financial services built from smart contracts rather than companies: lending, trading and earning without an intermediary.
DeFi replicates familiar financial functions using code on a blockchain. You can lend assets and earn interest, borrow against collateral, swap tokens, or provide liquidity to a market — all by interacting with smart contracts directly from your own wallet.
The appeal is that it is open and permissionless. There is no application, no approval, no minimum balance and no geographic restriction; the contract treats every address identically.
The risks are correspondingly different from traditional finance. Smart contract risk — bugs have drained hundreds of millions of dollars, and code being audited is not a guarantee. Liquidation risk — borrowing against volatile collateral means a price fall can liquidate your position automatically. No recourse — there is no support desk, no reversals and no compensation scheme. Governance risk — whoever controls a protocol’s admin keys may be able to change its rules.
DeFi is genuinely interesting technology and is not a beginner destination. Understand custody and wallet security thoroughly first.
For example
Most large crypto thefts have been DeFi contract exploits, not blockchains being broken.