DeFi (decentralised finance)
DeFi is the umbrella term for financial services such as trading, lending or earning interest that run as programs on the blockchain, with no bank or exchange as operator.
Explained simply
Everything a bank does can be described as a rule: take deposits, lend against collateral, exchange currencies. DeFi translates these rules into smart contracts. The programs run on the blockchain, anyone can use them, nobody can switch them off unilaterally.
There is no counter, no opening hours and no credit check. Instead, deposited assets secure every deal. Anyone wanting a loan deposits more than they borrow.
DeFi is innovative but also risky: coding errors, hacks and the absence of investor protection have repeatedly led to heavy losses. In the EU the sector is so far only partially regulated.
From the familiar world
A cash machine that not only dispenses money but also grants loans, exchanges currencies and pays interest, all by fixed rules, with no branch behind it. DeFi is a world of such machines.
An example
A user deposits Ether in a lending protocol and borrows stablecoins against it, in seconds, with no application. If the collateral's value falls too far, the program sells it automatically to cover the loan.
Why it matters
DeFi shows where the journey can lead: financial services as open infrastructure. Major banks are now testing the technology in closed variants. For clients: understand it, yes; use it directly only with a clear view of the risks.
To pass on
„DeFi is banking as a vending machine: fixed rules, around the clock, no bank behind it. Exciting, but without deposit insurance.“
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