Definition
DeFi, or decentralized finance, is a broad term for financial services built on public blockchains that remove the need for centralized institutions. Instead of relying on banks or brokers to hold funds and process transactions, DeFi applications use smart contracts to define and enforce financial rules automatically. These applications typically allow users to lend, borrow, trade, or earn yield on digital assets in a permissionless way.
As a concept, DeFi describes an open financial ecosystem where anyone with an internet connection can access services directly through blockchain networks. Well-known DeFi protocols, such as lending platforms and decentralized exchanges, form interconnected markets that share liquidity and pricing information on-chain. The term also encompasses the economic incentives, governance models, and token-based mechanisms that coordinate participation across these applications.
Context and Usage
DeFi is often used as an umbrella label for protocols like Aave and Curve that provide specific financial functions on-chain. In this context, DeFi highlights that these services are non-custodial, meaning users retain control of their assets through their own wallets rather than depositing them with a centralized entity. The concept also covers mechanisms such as Liquidity Mining, where participants are rewarded with tokens for contributing assets to DeFi markets.
Within the broader crypto ecosystem, DeFi is closely associated with DEX platforms that enable peer-to-peer trading of tokens without a central order book. Newer designs, including systems that build on or restake existing infrastructure like EigenLayer, are often described as part of the evolving DeFi landscape. Overall, the term signals a shift from institution-based finance toward programmable, blockchain-native financial primitives.