DeFi stands for “Decentralized Finance,” which refers to a financial system that operates on a decentralized, open-source blockchain network, rather than relying on traditional financial intermediaries such as banks, brokers, or exchanges. DeFi aims to create a more open, transparent, and accessible financial system that allows users to borrow, lend, trade, and invest without the need for intermediaries.
DeFi applications are built on top of blockchain networks, such as Ethereum, and use smart contracts to automate financial transactions. These smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. They allow for trustless and transparent financial transactions without the need for a central authority.
Some popular DeFi applications include decentralized exchanges (DEXs), such as Uniswap and SushiSwap, which allow users to trade cryptocurrencies without the need for a centralized exchange, lending platforms such as Aave and Compound, which allow users to lend and borrow cryptocurrencies, and stablecoins such as USDT and DAI, which aim to provide stability in volatile cryptocurrency markets.