DeFi (Decentralized finance)
In short DeFi is the set of financial apps, like exchanges, lending, and derivatives, that run on smart contracts instead of banks or brokers.
DeFi, short for decentralized finance, covers financial services built as smart contracts on public blockchains. Instead of a company holding your money, you connect a wallet and interact with code directly. Swapping, lending, borrowing, earning yield, and trading derivatives all exist in DeFi form.
The building blocks are simple. Decentralized exchanges use liquidity pools and automated market makers rather than order books run by a company. Lending protocols hold deposits in pools and let borrowers take loans against collateral, liquidating positions that fall below a threshold. Oracles feed outside prices into contracts. Because these pieces are open, apps stack on top of each other, which people call composability.
For holders of small tokens, DeFi is usually where the token trades first, through a DEX pool on Solana, BNB Chain, Base, or Ethereum, long before any centralized listing. It is permissionless, so anyone can launch a token or a pool, and nobody screens what gets listed. There is no customer support and no reversing a mistaken transaction.
The risks stack too. A bug in one protocol can spread to others that rely on it, an oracle can be manipulated, and an admin key can be abused. High advertised yields are often paid in a freshly minted reward token whose price falls as farmers sell. Check how long a protocol has run, how much value it holds, whether it was audited, who controls upgrades, and which approvals you are granting when you connect your wallet.