DeFi refers to a financial system that operates without traditional, centralized intermediaries like banks, brokers, or exchanges. It uses blockchain technology, especially Ethereum, to allow anyone anywhere to access financial services such as borrowing, lending, and trading directly through peer-to-peer transactions.
DeFi is a powerful tool for financial inclusion. It’s going to empower people who have been excluded from the traditional financial system and give them access to financial services.
Sam Bankman-Fried, CEO of FTX
In Simpler Terms
Imagine you want to borrow money for a new bike or lend some cash you’ve saved up. Normally, you’d go through a bank, right? DeFi changes this process. Think of it as a financial matchmaking service on your phone.
Do you want to earn interest on your savings? DeFi platforms can match you with someone looking to borrow money. Want to get a loan? Connect directly with a lender. It’s all done through smart contracts on the blockchain, automatically executing the deal terms without needing a middleman.
But this isn’t just about loans. It’s a whole financial ecosystem. You can invest in digital assets, trade cryptocurrencies, and even buy insurance—all decentralized.
