Understanding DeFi
Decentralised finance explained: lending protocols, liquidity pools, DEXs, yield farming, and smart contracts.
Understanding DeFi
Decentralised Finance (DeFi) refers to financial services built on blockchain networks that operate without traditional intermediaries such as banks or brokerages. Smart contracts automate the rules and execution of financial agreements.
Core DeFi Primitives
- DEXs (Decentralised Exchanges): Trade assets peer-to-peer without a custodian. Examples: Uniswap, Curve.
- Lending Protocols: Borrow against collateral or earn interest. Examples: Aave, Compound.
- Liquidity Pools: Provide liquidity to earn trading fees and protocol rewards.
- Yield Aggregators: Automate strategies to optimise returns across protocols.
DeFi carries significant risks including smart contract bugs, liquidation risk, and high market volatility. Never invest more than you can afford to lose.
⚠ Disclaimer: This guide is for educational and informational purposes only. It does not constitute financial, investment, legal, or tax advice. Cryptocurrency markets are highly volatile. Always conduct your own research and consult qualified professionals before making financial decisions.