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
Staking is the process of committing or delegating cryptocurrency to help secure a proof-of-stake blockchain and potentially earn protocol rewards.
Smart Contract
A smart contract is self-executing code stored on a blockchain that automatically performs actions when certain conditions are met.
Liquidity Pool
A liquidity pool is a collection of crypto assets locked in a smart contract that allows users to trade tokens on decentralized exchanges without relying on a traditional order book.
Yield Farming
Yield farming is a DeFi strategy in which users move or deposit crypto assets into protocols to earn fees, token incentives, interest, or other rewards.