DeFi, or decentralized finance, is a concept in the financial sector based on the use of blockchain technology and smart contracts. It provides access to financial services without the need to rely on banks, brokers, or other intermediaries. In this system, asset management and transaction execution are handled through programmatic code.

The core idea of DeFi is to grant financial access to anyone with an internet connection, regardless of their location, status, or banking history. This makes decentralized finance a revolutionary step toward creating a fair and accessible financial system.

The idea of decentralized finance (DeFi) traces back to Bitcoin. However, the first cryptocurrency was merely a digital means of exchange, and the development of financial tools on top of a blockchain only became possible with the launch of Ethereum in 2015. Ethereum introduced a revolutionary solution in the form of smart contracts—programmable algorithms capable of automatically executing transactions when specified conditions are met.

The first prominent example of DeFi usage was MakerDAO, launched in 2017. It allowed users to take out loans in DAI, a stablecoin, using cryptocurrency as collateral and managing the process through smart contracts. Soon after, other projects followed, such as Uniswap—a decentralized exchange (DEX) enabling direct cryptocurrency trading between users—and Compound, a platform for lending and borrowing. These applications laid the foundation for the DeFi ecosystem, which began to expand rapidly.

In 2020, dubbed the "Year of DeFi," the industry experienced explosive growth. During this period, projects started adopting the concept of yield farming, where users could provide liquidity and earn rewards in return. This innovation attracted the attention of major investors and the general public, resulting in billions of dollars being poured into the DeFi sector.
Throughout its history, the core objectives of DeFi have remained consistent:

• Eliminating Intermediaries: DeFi replaces banks, exchanges, and other financial institutions with smart contracts, enabling users to interact directly with one another.
• Transparency: All operations occur on open blockchains, making them verifiable by anyone.
• Accessibility: Financial services become available to everyone, regardless of location or social status.
• Financial Inclusion: DeFi provides opportunities for individuals who lack access to traditional banking systems.

Decentralized Finance (DeFi) represents a fundamentally different approach to financial services compared to the traditional system (CeFi). The primary distinction lies in the absence of intermediaries. In traditional finance, banks, brokers, and other institutions control transactions and act as guarantors. In DeFi, this role is performed by smart contracts operating on the blockchain, which automatically execute transactions based on predefined conditions. This makes the system independent and decentralized.

Blockchain technology is the backbone of DeFi, providing transparency and security for all operations. All transactions and operational rules are recorded in a distributed network, making them verifiable and eliminating the possibility of hidden manipulations. This is a key difference from traditional finance, where transaction data is closed to users.

The transparency of DeFi allows every user to see how system mechanisms work, whether for lending, cryptocurrency exchange, or asset management. This eliminates the need for trust, as required in CeFi, and grants users full control over their funds.

Additionally, DeFi offers accessibility to everyone. While traditional finance can impose barriers due to geography, credit history, or social status, DeFi is available to anyone with an internet connection. This approach opens financial opportunities to millions of people who previously lacked access to banking systems.

DeFi encompasses a wide range of financial services that were previously available only through traditional financial institutions. These directions allow users to perform transactions directly, leveraging blockchain and smart contract capabilities.

DeFi encompasses a wide range of financial services that were previously available only through traditional financial institutions. These directions allow users to perform transactions directly, leveraging blockchain and smart contract capabilities.

Liquidity pools are the foundation of many DeFi protocols. Users contribute their assets to these pools, which are used to facilitate transactions on DEXs or other platforms. In return, they earn rewards in the form of tokens or fees. Notable platforms include Curve, Balancer, and Yearn Finance.

DeFi platforms like Aave and Compound allow users to borrow funds against their crypto assets or lend their funds to others. This process is fully automated via smart contracts, eliminating the need for banks or other intermediaries. Interest rates are calculated in real-time, and users can earn returns by providing liquidity.

Gambling and betting are emerging as popular directions within DeFi. Platforms in this category allow users to participate in games of chance, sports betting, or lotteries, ensuring full transparency of all processes via blockchain. This eliminates the possibility of fraud by organizers, making gambling in DeFi more fair. Examples include Augur and Polymarket.

DeFi represents a revolution in the financial sector, offering users full control over their assets and access to services without intermediaries. Through blockchain and smart contracts, DeFi ensures transparency, accessibility, and new ways to generate income, such as decentralized exchanges, lending, and yield farming. Despite inherent risks and challenges, decentralized finance continues to attract millions of users, paving the way for a more fair, secure, and inclusive economic system.