What is DeFi?

Decentralized finance (DeFi) is an ecosystem of financial applications built on top of the blockchain. These DeFi applications are organized as protocols, or blockchain-based software where rules are set in code and decision-making is typically left up to network participants and token holders. Protocols are tackling use cases such as lending/borrowing, trading, asset management, derivatives and insurance. They share the common traits of being permissionless, trustless, global and composable. Here is what these terms mean:

Permissionless - anyone around the world can access services from these protocols regardless of their background or credit score as long as they have access to the internet.

Trustless - DeFi does not rely on central third parties or intermediaries, instead delegating the trust to systems of smart contracts which anyone can review and audit.

Composable - any protocol is able to freely integrate with and build on top of existing solutions. This accelerates protocols’ time to market and allows cross-protocol interaction unlike anything in the existing financial industry. DeFi has been a driving force for crypto in 2020. To learn more about its growth, risks, leading use-cases and its path ahead, download IntoTheBlock's report below:

Last updated 4 years ago