DeFi is an open and global financial system built for the internet age – an alternative to a system that's opaque, tightly controlled, and held together by decades-old infrastructure and processes. It gives you control and visibility over your money. It gives you exposure to global markets and alternatives to your local currency or banking options. DeFi products open up financial services to anyone with an internet connection and they're largely owned and maintained by their users. So far tens of billions of dollars worth of crypto has flowed through DeFi applications and it's growing every day.

What's DeFi?

DeFi is a collective term for financial products and services that are accessible to anyone who can use Ethereum – anyone with an internet connection. With DeFi, the markets are always open and there are no centralized authorities who can block payments or deny you access to anything. Services that were previously slow and at risk of human error are automatic and safer now that they're handled by code that anyone can inspect and scrutinize.

There's a booming crypto economy out there, where you can lend, borrow, long/short, earn interest, and more. Crypto-savvy Argentinians have used DeFi to escape crippling inflation. Companies have started streaming their employees their wages in real time. Some folks have even taken out and paid off loans worth millions of dollars without the need for any personal identification.

DeFi vs traditional finance

One of the best ways to see the potential of DeFi is to understand the problems that exist today.

• Some people aren't granted access to set up a bank account or use financial services.
• Lack of access to financial services can prevent people from being employable.
• Financial services can block you from getting paid.
• A hidden charge of financial services is your personal data.
• Governments and centralized institutions can close down markets at will.
• Trading hours are often limited to business hours of specific time zone.
• Money transfers can take days due to internal human processes.
• There's a premium to financial services because intermediary institutions need their cut.

Explore DeFi Apps

A comparison

DeFi

One of the best ways to see the potential of DeFi is to understand the problems that exist today.

• You hold your money.
• You control where your money goes and how it's spent.
• Transfers of funds happen in minutes.
• DeFi is open to anyone.
• The markets are always open.
• Trading hours are often limited to business hours of specific time zone.
• It's built on transparency – anyone can look at a product's data and inspect how the system works.
• There's a premium to financial services because intermediary institutions need their cut.

Traditional Finance

One of the best ways to see the potential of DeFi is to understand the problems that exist today.

• Your money is held by companies.
• You have to trust companies not to mismanage your money, like lending to risky borrowers.
• Financial activity is tightly coupled with your identity.
• You must apply to use financial services.
• The markets are always open.
• Markets close because employees need breaks.
• Financial institutions are closed books: you can't ask to see their loan history, a record of their managed assets, and so on.
• There's a premium to financial services because intermediary institutions need their cut.

It started with Bitcoin...

Bitcoin in many ways was the first DeFi application. Bitcoin lets you really own and control value and send it anywhere around the world. It does this by providing a way for a large number of people, who don't trust each other, to agree on a ledger of accounts without the need for a trusted intermediary. Bitcoin is open to anyone and no one has the authority to change its rules. Bitcoin's rules, like its scarcity and its openness, are written into the technology. It's not like traditional finance where governments can print money that devalues your savings and companies can shut down markets.

Ethereum builds on this. Like Bitcoin, the rules can't change on you and everyone has access. But it also makes this digital money programmable, using smart contracts, so you can go beyond storing and sending value.

Programmable money

This sounds odd... "why would I want to program my money"? However, this is more just a default feature of tokens on Ethereum. Anyone can program logic into payments. So you can get the control and security of Bitcoin mixed with the services provided by financial institutions. This lets you do things with cryptocurrencies that you can't do with Bitcoin like lending and borrowing, scheduling payments, investing in index funds and more.

What can you do with DeFi?

• Send money around the globe
• Stream money around the globe
• Access stable currencies
• Borrow funds with collateral
• Borrow without collateral
• Start crypto savings
• Trade tokens
• Grow your portfolio
• Fund your ideas
• Buy insurance
• Manage your portfolio

Send money around the globe quickly

As a blockchain, Ethereum is designed for sending transactions in a secure and global way. Like Bitcoin, Ethereum makes sending money around the world as easy as sending an email. Just enter your recipient's ENS name (like bob.eth) or their account address from your wallet and your payment will go directly to them in minutes (usually). To send or receive payments, you will need a wallet.

See Payment Dapps

Stream money around the globe...

You can also stream money over Ethereum. This lets you pay someone their salary by the second, giving them access to their money whenever they need it. Or rent something by the second like a storage locker or electric scooter.

See Payment Dapps

Access stable currencies

Cryptocurrency volatility is a problem for lots of financial products and general spending. The DeFi community has solved this with stablecoins. Their value stays pegged to an another asset, usually a popular currency like dollars.

More on Stablecoins

Borrowing

Borrowing money from decentralized providers comes in two main varieties. Peer-to-peer, meaning a borrower will borrow directly from a specific lender. Pool-based where lenders provide funds (liquidity) to a pool that borrowers can borrow from.

See Borrowing dApps

Borrowing with privacy

Today, lending and borrowing money all revolves around the individuals involved. Banks need to know whether you're likely to repay a loan before lending. Decentralized lending works without either party having to identify themselves. Instead, the borrower must put up collateral that the lender will automatically receive if their loan is not repaid. Some lenders even accept NFTs as collateral. NFTs are a deed to a unique asset, like a painting. More on NFTs

Access to global funds

When you use a decentralized lender you have access to funds deposited from all over the globe, not just the funds in the custody of your chosen bank or institution. This make loans more accessible and improves the interest rates.

Tax-efficiencies

Borrowing can give you access to the funds you need without needing to sell your ETH (a taxable event). Instead, you can use ETH as collateral for a stablecoin loan. This gives you the cash-flow you need and lets you keep your ETH. Stablecoins are tokens that are much better for when you need cash as they don't fluctuate in value like ETH. More on stablecoins

Flash loans

Flash loans are a more experimental form of decentralized lending that let you borrow without collateral or providing any personal information. They're not widely accessible to non-technical folks right now but they hint at what might be possible to everyone in the future. It works on the basis that the loan is taken out and paid back within the same transaction. If it can't be paid back, the transaction reverts as if nothing ever happened.

Start saving with crypto

You can earn interest on your crypto by lending it and see your funds grow in real time. Right now interest rates are much higher than what you're likely to get at your local bank (if you're lucky enough to be able to access one). Here's an example: