Complete guide from DeFi basics to protocols and risks
DeFi (Decentralized Finance) is finance without central intermediaries like banks.
Participants connect P2P via blockchain. Deposits and loans are possible without banks.
No central authority controlling funds. Available 24/7 to everyone.
DeFi relies on blockchain and smart contracts. Blockchain provides security.
Smart contracts execute code automatically when conditions are met.
| Category | Traditional Finance | DeFi |
|---|---|---|
| Operator | Bank (Centralized) | Smart Contract (Decentralized) |
| Guarantee | Deposit Protection | None (Market Risk) |
| Interest Rate | Relatively Low | High (Variable) |
| Accessibility | Limited | Open 24/7 |
Swap crypto without intermediaries. e.g. Uniswap
Liquidity pools, no sign-upReplaces bank services. e.g. Aave
Interest earnings, collateral loansStable value assets. e.g. DAI, USDC
Pegged to $1, used for paymentsFutures, options. e.g. Synthetix
Synthetic assets, smart contract insuranceLending platform. Flash loans.
DEX. AMM Model.
Issuer of DAI. Collateralized debt.
Algorithmic interest rate protocol.
USA: SEC strict enforcement
EU: MiCA regulation
Korea: User protection laws
Lack of specific DeFi regulations. Effectively unregulated.
Code errors and exploits
Automatic liquidation on price drops
Rug pulls and fraud
Lost keys, wrong transfers are irreversible
Disclaimer
This guide is for educational purposes only. Not investment advice.