What is DeFi?
Financial services (lending, trading, earning) built on blockchains without banks as middlemen.
DeFi — decentralised finance — is the collection of financial services rebuilt as smart contracts on blockchains: lending, borrowing, trading, and earning yield, all without a bank or broker operating the service. You interact with code directly from your own wallet; the "company" is a protocol, and its rules are public.
The genuine innovation is real: markets that run 24/7, settle in minutes, and can't discriminate between users. So are the risks, and they're different from traditional finance — smart-contract bugs, protocol hacks, tokens with no recourse, and yields that are generous precisely because something in the machine is taking risk with your deposit. The disasters that fill our graveyard and scam files skew heavily toward this corner of crypto.
A sensible rule: in DeFi, the yield is the price of the risk. If you can't explain where a return comes from, you are the return.
See it in practice
Related terms: Ethereum · Staking · Custodial · full glossary
FAQ
Is DeFi legal in Australia?
Using DeFi protocols isn't illegal, but most operate outside Australia's regulatory perimeter — meaning no AFSL, no dispute scheme, and no compensation when things fail. The tax rules still apply in full to every swap and reward.
How do DeFi yields exist without a bank?
You're being paid to provide something: liquidity for traders, collateral for borrowers, or security for a network. The yield is compensation for lending out capital and bearing the associated risks — it is never free money.
General information only, not financial advice. Definitions are maintained in our fact database and reviewed with the daily rebuild.