What is decentralized finance (DeFi)?

What Is Decentralized Finance (DeFi)?

DeFi (decentralized finance) is financial services built on blockchains without a central bank or company in the middle. You connect your wallet to apps (smart contracts) to lend, borrow, swap tokens, or earn yield. The code runs on the blockchain; no single party can freeze your funds if the rules are followed.

Common DeFi Activities

Lending: deposit crypto and earn interest; or borrow against your collateral. Swapping: trade one token for another via liquidity pools. Staking and yield farming: lock assets to earn rewards. These can offer higher returns than traditional finance but come with smart contract risk, volatility, and sometimes unclear regulation.

Risks

Smart contracts can have bugs or be exploited. Values can drop quickly. Some projects are scams. In India, DeFi gains may be taxable. Only use well-known protocols and amounts you can afford to lose. Never share your seed phrase with any site or "support" agent.