What it means
Applications and dependencies
DeFi describes a group of applications rather than one standardized service. A protocol can interact with tokens, price feeds, governance mechanisms, websites and infrastructure operated by different parties. The extent of decentralization must be evaluated for the particular deployment.
Understand the transaction
A user may authorize token spending or interact directly with a contract through a wallet. Before doing so, examine what the permission permits, which assets are at risk and how the protocol can change. Market exposure and software behavior remain separate sources of risk.
Related concepts
Smart contract, Cryptocurrency wallet, Stablecoin, Price volatility.
In practice
A concrete example
A user reviews a lending protocol’s collateral, liquidation and contract permissions rather than treating the DeFi label as evidence of safety.
Technical notes & boundaries
Smart contracts do not remove code, oracle, governance, custody or liquidity risks. Access and advertised yields are not universal or guaranteed.
Go to the source.
Original references used for this definition. Product details and standards can change.