What is DeFi (Decentralized Finance)?
DeFi is an umbrella term for a collection of financial applications built on top of blockchain networks. The goal is to rebuild and improve upon traditional financial systems without relying on central intermediaries like banks.
Earn interest on your crypto by lending it out, or borrow against your holdings, all without a bank.
Decentralized Exchanges let you trade digital assets directly with other users, with no central company holding your funds.
Cryptocurrencies pegged to the value of real-world assets like the US Dollar, providing stability in a volatile market.
Get coverage for smart contract failures or other crypto-specific risks through community-governed insurance pools.
Instead of relying on contracts and institutions, DeFi uses "smart contracts" – self-executing code on a blockchain – to automate financial processes. This makes them transparent, permissionless, and open to anyone with an internet connection.
This is a huge topic! The best way to understand the difference is to see where it all started.