DeFi Primer

DeFi stands for decentralized finance: financial services built from smart contracts instead of bank databases and office workflows. In practice, that means users can swap, lend, borrow, and hold dollar-like assets directly from a wallet.

The ecosystem feels broad at first, but most products are combinations of a few recurring building blocks. Once you see the layers, the landscape becomes much easier to navigate.

Decentralized exchanges, or DEXs, let users trade without a central order desk. Lending protocols let users post collateral and borrow against it. Stablecoins make the whole system easier to use because prices, debts, and yields are easier to reason about in familiar units.

All of this depends on the base chain for security and settlement. If the chain is congested, fees rise. If the chain is secure and well adopted, DeFi applications inherit those advantages.

DeFi can feel open and fast because these protocols are composable. One app can route through another, which is powerful for innovation but also means risks can spread across the stack.