Definition
DeFi (Decentralized Finance) is an ecosystem of financial applications running on blockchain without traditional intermediaries. Instead of banks, smart contracts are used.
Traditional Finance vs DeFi
| Traditional | DeFi |
|---|---|
| Banks, brokers | Smart contracts |
| KYC required | Anonymity possible |
| Business hours | 24/7 |
| Geographic restrictions | Global access |
| Slow transfers | Fast transactions |
Main DeFi Services
DEX (Decentralized Exchanges)
- Uniswap, SushiSwap, Curve
- Trading without intermediaries
- Liquidity pools
Lending
- Aave, Compound
- Crypto-backed loans
- Interest on deposits
Staking and Yield Farming
- Lido, Rocket Pool
- Staking yields
- Reward farming
Stablecoins
- DAI, USDC in DeFi
- Stable value
- Foundation for other services
DeFi Advantages
- Accessibility — only need internet and wallet
- Transparency — open code, public transactions
- Control — you own your assets
- Innovation — new financial instruments
DeFi Risks
- Smart contracts — bugs can lead to losses
- Volatility — cryptocurrencies are unstable
- Impermanent Loss — liquidity provider losses
- Regulatory risks — legal uncertainty
TVL (Total Value Locked)
TVL is the total value of assets in DeFi protocols. At its 2021 peak, it exceeded $180 billion.
Tip
Start by learning about staking — it's the simplest way to get into DeFi, combining with DCA strategy.
