DeFi, short for Decentralized Finance, is a new financial system that operates on blockchain technology, most notably Ethereum. Instead of relying on traditional intermediaries like banks or exchanges, DeFi uses smart contracts to automate transactions.
The main advantages of DeFi are its decentralized, transparent, and 24/7 accessibility for anyone with an internet connection, without being limited by location or credit history. Services within DeFi include lending, borrowing, trading, and earning interest.
However, DeFi still carries significant risks, including security vulnerabilities in smart contracts, the volatility of the cryptocurrency market, and a lack of clear regulatory frameworks. Despite this, DeFi continues to grow rapidly and promises to reshape the future of the financial industry.