DeFi
DeFi: DeFi, short for decentralised finance, is financial services such as trading, lending and borrowing that run on smart contracts on public blockchains instead of through banks or brokers. Anyone with a self-custody wallet can use them, and the code, rather than a company, holds and moves the funds.
How DeFi works
DeFi apps are sets of smart contracts, mostly on Ethereum and similar networks. You connect your wallet, approve the contract and transact directly. Common examples are decentralised exchanges that use automated market makers, lending markets that set rates by supply and demand, and on-chain options and perpetuals platforms.
Risks to understand
Smart contracts can contain bugs that are exploited, token prices can be volatile, and some projects are less decentralised than they claim. Approving the wrong contract can drain a wallet. Using well audited protocols and small test amounts first reduces, but does not remove, these risks.
Frequently asked questions
Is DeFi the same as crypto?
No. Crypto is the asset. DeFi is the set of financial apps that run on blockchains using those assets.
What is a DeFi options platform?
It is a protocol that lets users buy or sell options contracts on-chain, with collateral and settlement handled by smart contracts.