DeFi
Blockchain-based financial applications that use smart contracts instead of relying entirely on traditional intermediaries.
DeFi is short for decentralised finance. It describes applications such as exchanges, lending markets, and asset-management systems built from blockchains and smart contracts. See Kaavon's "Automated Market Maker," "Lending Protocol," and "Liquidity Pool" glossary definitions for the specific building blocks most DeFi applications are actually made of.
Users typically interact through a wallet and are responsible for reviewing contracts, permissions, network fees, and risks. DeFi applications can fail through bugs, poor liquidity, oracle problems, or fraud — see Kaavon's "Oracle," "Oracle Manipulation," and "Flash Loan" glossary definitions for specific, documented ways that can happen.
Examples
- A decentralised exchange can let users trade against a liquidity pool.
- A lending protocol can use smart contracts to track supplied collateral and borrowed assets.