What Is DeFi (Decentralized Finance)? Meaning & Example
Definition
DeFi refers to financial services such as lending, borrowing and trading built on blockchains using smart contracts. It aims to work without traditional intermediaries but carries technical and platform risks.
Related terms
A smart contract is a program stored on a blockchain that runs automatically when set conditions are met. It powers DeFi, NFTs and many other applications.
Liquidity PoolA liquidity pool is a collection of tokens locked in a smart contract that traders can swap against. People who deposit tokens earn a share of trading fees but face risks such as impermanent loss.
StablecoinA stablecoin is a cryptocurrency designed to hold a steady value, usually pegged to a currency like the US dollar. Its stability depends on how it is backed and managed, and pegs can break.
What is DeFi (Decentralized Finance)?
DeFi refers to financial services such as lending, borrowing and trading built on blockchains using smart contracts. It aims to work without traditional intermediaries but carries technical and platform risks.
Can you give an example of DeFi (Decentralized Finance)?
A DeFi app might let you lend stablecoins to borrowers directly through a smart contract.