Complete Guide to Decentralized Finance (DeFi)
What is DeFi?
DeFi (Decentralized Finance) is a blockchain-based financial system. Unlike traditional finance, DeFi doesn't require intermediaries like banks or brokers—all services run automatically through smart contracts.
Core Features of DeFi:
- Permissionless: Anyone can participate
- Transparent: All transactions and code are public
- Non-custodial: Users have full control of assets
- Global: Borderless, 24/7 operation
Main DeFi Applications
1. Decentralized Exchanges (DEX)
Trade without registration, just connect your wallet:
- • Uniswap: Largest DEX on Ethereum
- • PancakeSwap: Largest DEX on BSC
- • Curve: Focused on stablecoin trading
2. Lending Protocols
Borrow without credit checks, using collateral:
- • Aave: Multi-asset lending
- • Compound: Algorithmic interest rates
- • MakerDAO: Generate DAI stablecoin
3. Yield Farming
Provide liquidity to earn fees and token rewards
- • Provide trading pairs (e.g., ETH-USDT)
- • Bear impermanent loss risk
- • Yields from 5% to hundreds %
DeFi Risks
⚠️ DeFi High Risk Warning
DeFi offers high yields but also high risks. Be aware of these dangers:
🔴 Smart Contract Risk
Code vulnerabilities can lead to hacks and fund loss
🔴 Impermanent Loss
Price volatility can cause losses when providing liquidity
🔴 Rug Pulls
Some projects are scams that steal funds
🔴 Liquidation Risk
Collateral price drops can trigger liquidation
DeFi Security Practices
✅ Choose Reputable Projects
Prioritize high-TVL, long-running, audited protocols
✅ Diversify Risk
Don't put all funds in one protocol, max 20% per protocol
✅ Use Hardware Wallet
Use hardware wallets like Ledger or Trezor for large amounts
Track DeFi Tokens with Heatmap
DeFi token prices reflect the sector's activity:
View DeFi Token Prices