Unlike traditional finance, which is dominated by banks and financial institutions, DeFi (Decentralized Finance) is an open financial ecosystem based on blockchain technology. This ecosystem consists of peer-to-peer financial applications that do not rely on any intermediary institutions. By embedding core financial elements such as lending, payments, derivatives, and asset trading into smart contracts, DeFi provides more equitable and transparent financial services to users worldwide.
At its peak in December 2021, the total value locked (TVL) in the DeFi ecosystem surpassed $256 billion, growing nearly fourfold in just one year. This figure clearly demonstrates the appeal of DeFi as a financial innovation. This guide will provide an in-depth explanation of DeFi's development history, operational principles, key applications, and potential risks, helping you gain a comprehensive understanding of this revolutionary financial system.
Core Breakthroughs of DeFi Compared to Traditional Finance
The traditional financial system has long been