GLOSSARY // Crypto
DeFi (Decentralized Finance)
DeFi is financial services — lending, borrowing, trading, earning yield — run by smart contracts on a blockchain instead of by a bank or broker. There is no account to open and no institution approving you; you connect a wallet and interact with the code directly.
That removes gatekeepers and adds raw risk. The contracts are public code, and a bug can be drained in minutes with no deposit insurance and no one to call. Yields advertised at 20% or more usually carry matching risk — of the token collapsing, the contract failing, or the whole scheme unwinding.
A user deposits $10,000 of a stablecoin into a lending protocol quoting 6% and earns interest paid by borrowers, with no bank involved. The 6% is real only as long as the contract holds and the stablecoin keeps its peg — both of which have failed elsewhere.
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.