DeFi (Decentralized Finance)
An ecosystem of financial applications running on blockchain via smart contracts, without banks or other central intermediaries.
DeFi (decentralized finance) is an umbrella term for financial applications — lending, exchanges, insurance, derivatives — that run on blockchain via smart contracts, without a bank or any other central intermediary involved. Users retain full control over their funds at all times, since the funds never land in a third-party company's account.
DeFi's biggest advantage is accessibility (anyone with a crypto wallet and internet access can use these services) and code transparency, while its biggest risk is bugs in smart contracts, which are sometimes exploited to steal locked funds.
Related terms
Smart contract
A program recorded on the blockchain that automatically executes programmed conditions without an intermediary.
DEX vs. CEX (decentralized vs. centralized exchange)
A DEX is an exchange running on smart contracts with no intermediary; a CEX is a traditional exchange run by a company, such as Binance or Kraken.
Rug Pull
A scam in which the creators of a crypto project suddenly withdraw all liquidity or investor funds and disappear.