DeFi (Decentralized Finance) is a broad ecosystem of financial applications, protocols, and services built on blockchains that allow users to perform financial operations without relying on a traditional centralized intermediary. Instead of a bank, broker, or financial company controlling the operation, part of the financial logic is implemented through smart contracts, blockchain consensus, and cryptographic authorization.

Users normally interact with a DeFi protocol through a dApp and a crypto wallet. The wallet allows the user to control assets and authorize operations by signing blockchain transactions. Depending on the protocol, users can exchange assets, lend them, borrow against collateral, provide liquidity, or participate in governance.

Major DeFi components include liquidity pools, automated market makers, lending protocols, yield strategies, and oracles. Protocol governance may be organized through a DAO.

DeFi is not necessarily completely decentralized in every implementation. A protocol may depend on centralized interfaces, external data providers, administrative keys, upgrade mechanisms, or infrastructure providers. Therefore, the actual level of decentralization must be evaluated for each protocol separately.

A major characteristic of DeFi is composability. One protocol can interact with another through smart contracts, allowing financial operations to be combined into more complex strategies. For example, a user can borrow an asset from one protocol and use it in another protocol for trading or liquidity provision.

DeFi also introduces significant risks. Smart-contract vulnerabilities, oracle failures, liquidity shortages, market volatility, governance attacks, phishing, and user mistakes can result in losses. Therefore, DeFi should be understood as programmable financial infrastructure rather than as an automatically safe replacement for traditional finance.