What does DeFi mean?

Decentralized finance

Those who are big into Bitcoin and blockchain use the abbreviation DeFi to refer to "decentralized finance." Decentralized finance eschews banks, brokerages, and other traditional financial institutions in favor of decentralized apps that execute smart contracts on the blockchain.

(Yes, there's an explanation of some of those terms coming.)

What is decentralized finance?

Decentralized finance seeks to make financial products and transactions available to anyone without going through a bank or brokerage. In practice, DeFi takes the form of blockchain-based transactions which are executed through computer programs called smart contracts. Each transaction is recorded on the blockchain, which is essentially just a list of transactions used to verify that a person owns the assets they say they own.

The decentralized part of decentralized finance refers to a) the fact that DeFi (at least theoretically) decentralizes financial markets and b) the fact that the programs and data that make DeFi possible are distributed among multiple computers (and not stored in one central location). While DeFi is most commonly used to refer to cryptocurrency markets, nearly any form of financial transaction can be conducted on a DeFi platform.


Is DeFi the wave of the future? Or is it just a passing fad? I legitimately don't know
DeFi means "decentralized finance"
DeFi means "decentralized finance"

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Updated May 12, 2021

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