DeFi
Short for “Decentralized Finance,” it refers to financial applications built on blockchain networks that operate without traditional intermediaries.
✦ Key Insight
DeFi platforms use smart contracts to replicate financial services like lending, borrowing, trading, and yield farming in a decentralized manner. Users retain control of their funds, and transactions are transparent and accessible globally. DeFi has grown rapidly because it removes the need for bank
✕ Common Misconceptions
It is often mistaken for similar sounding terms, but the technical implementation is distinct.
Detailed Explanation
In Practice
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Staking
Locking a proof-of-stake network's coin to help secure it, in exchange for a share of newly issued rewards.
Smart Contract
A smart contract is blockchain-deployed code that can hold state and execute predefined rules when called.
Liquidity Pool
A smart contract holding reserves of two or more tokens that traders swap against.
Yield Farming
Moving capital between DeFi protocols to earn the highest available rewards, usually paid in a protocol's own token.