Simply put: DeFi platforms offer financial services without the need for banks or other centralized institutions.
But how? Well, instead of a bank or financial institution in the middle of a transaction, DeFi uses smart contracts (a computer program on a blockchain) to manage transactions.
Some established examples of DeFi are:
There are risks to investing in DeFi as even established platforms are relatively untested compared to the traditional financial system. But we are seeing further adoption of DeFi services including institutional activity from large banks. That may sound surprising but it could be seen as a sign that DeFi is maturing and on its way to a more mainstream audience.
Aside from its growth potential, DeFi may be an attractive investment if you believe in its broader purpose. DeFi has the potential to provide wider access to financial services across the globe and decrease transaction times (and hopefully costs) for consumers as it strips away some of the third parties that take profits.