Definition of DeFi
DeFi (short for Decentralized Finance) is a blanket term used to
describe the industry of financial services – payments, lending, trading
and more – provided through decentralized platforms on public
blockchains. As opposed to highly centralized traditional financial
institutions, these applications (known as dApps) are not controlled by
a single entity, which enables for higher transparency, safety and cost
reduction. In February 2019, the DeFi industry exceeded $1 billion in assets locked in DeFi protocols by users.
Decentralized finance applications are typically divided into three categories –
stablecoins (e.g., MakerDAO, Synthetix, EOSDT), lending (e.g., Compound Finance, Aave), exchanges (e.g., 0x, AirSwap, Bancor) – the majority of the services being interconnected and interoperable on the protocol level. The core features inherent to DeFi as a financial infrastructure are determined by the underlying blockchain technology.