Decentralized finance rebuilds banking without banks. Lending, borrowing, trading, and earning interest all happen through smart contracts. There is no loan officer. There is no account application. You connect a wallet, deposit collateral, and the code enforces the terms. Aave and Compound let you lend crypto and earn interest. MakerDAO lets you mint a stablecoin against collateral. Uniswap handles trading. The whole system runs on blockchains, mostly Ethereum and its layer 2 networks.

The appeal is access. Anyone with an internet connection can use DeFi. No credit check. No minimum balance. No geographic restriction. The risks are equally open. Smart contracts get exploited. Collateral ratios get liquidated in flash crashes. Yield farms promise 1000 percent APY and deliver zero. DeFi is transparent, which means you can see the code and the risks. It is also unforgiving. A mistake in a transaction can cost everything, and there is no fraud department to call.

Core DeFi use cases

• Lending and borrowing — deposit collateral, borrow against it
• Decentralized trading — swap tokens without a CEX
• Stablecoins — algorithmic or collateralized dollar-pegged assets
• Yield farming — earn tokens by providing liquidity

DeFi locks tens of billions of dollars in smart contracts. That number rises and falls with the market. The technology works. The question is whether it can grow beyond a niche of crypto-native users.