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Decentralized Finance (DeFi) is an emerging financial system built on public blockchains (primarily Ethereum) that aims to replicate and disintermediate traditional financial services. By using smart contracts instead of centralized intermediaries like banks, brokerages, and exchanges, DeFi allows users to perform transactions, borrow, lend, and trade in a transparent, permissionless, and peer-to-peer manner.
The core promise of DeFi is to create an open and accessible financial system for anyone with an internet connection, regardless of geography or traditional banking status.
DeFi is often described as a "money LEGO" because its various applications (protocols) can be combined and built upon one another, creating new and complex financial products.Smart Contracts are self-executing agreements written directly into code on the blockchain. They automatically execute the terms of an agreement (e.g., releasing collateral when a loan is repaid or swapping tokens during a trade) without needing a lawyer, bank, or other middleman