If my post about cryptocurrencies felt confusing, DeFi probably would feel worse. It’s one of those terms crypto bros throw around as if everyone already knows what it means.
I first encountered this term when the stakeholders at my previous job wanted a script on it. This is basically a blog-ified version of that TikTok script so bear with me. If you were like past me or just plain curious, let me clarify for you.
DeFi stands for decentralised finance. At its core, it’s an attempt to recreate traditional financial services but without banks, brokers, or middlemen.
DeFi, Defined
In the traditional financial system, banks sit in the middle. They hold your money, approve transactions, offer loans, and take fees for doing that.
DeFi removes that middle layer.
Instead of banks, DeFi uses smart contracts, which are self-executing programs on blockchains. These contracts automatically enforce rules (like “If X happens, then Y happens.”) with zero paperwork or approval officers. You’d be interacting directly with the system.
The Possibilities are Endless
DeFi apps (often called protocols) let you:
- Lend or borrow crypto
- Earn interest on digital assets
- Swap one cryptocurrency for another
- Access financial tools without needing a bank account
In theory, anyone with an Internet connection and a crypto wallet can use DeFi. That’s its whole thing: accessibility without permission.
DeFi vs Traditional Banking
So, is DeFi safer than banks? Not necessarily.
DeFi removes human intervention, but it introduces code risk. Let me explain. If a smart contract has a bug, it can be exploited. That’s usually no customer support, no refunds, and no one to call for help when things go wrong.
Yes, it is transparent (all transactions are public) but that doesn’t equal safety.
Why Care About DeFi?
For some, it’s about financial access, especially in regions where banking systems are limited or unreliable. For others, it’s about autonomy and controlling your own money without needing approval. But for many, it’s experimental. DeFi is less a finished system and more a live test of what the future of finance could look like.
My Take on Decentralising Finance
In my opinion, DeFi isn’t the future of finance. At least not yet. It’s volatile, complex, and still very much in beta. But it’s also one of the more interesting ideas to come out of crypto. It’s always new money but rarely new financial structures like this. I’m actually lowkey hopeful and it has so much potential, after ironing out a few kinks.
You don’t need to use DeFi to understand what it is and why it exists. Understanding it alone already puts you ahead of the hype. Also, now you have something to contribute in a room full of crypto bros!
P.S. This is based on my understanding of this subject and may not be complete as it’s just the fundamentals. If you want to know more, I’d suggest going to verified and credible sources like Investopedia and Coinbase.