DeFi is an abbreviation for the term decentralised finance. In general, it refers to Ethereum-based applications (DApps) that offer financing in the form of smart contracts against collateral in the form of crypto assets.
Decentralised Finance (DeFi) uses decentralised networks (blockchain) to transform, for example, traditional financial products into trustworthy and transparent protocols that run without intermediaries.
The spectrum of applications is diverse, from algorithmic stablecoins, to “margin trading”, derivatives, payments and decentralised exchanges, to name but a few.
The dominant area is “lending”, which takes place in exchange for crypto assets. The way DeFi projects usually work is that lenders provide capital in the form of so-called stablecoins, which are usually tied to the value of the US dollar. On the other hand, borrowers take out “stablecoin” loans by providing collateral in the form of Ethereum, or another digital currency as security.
