What is DeFi? What are its core components? How to think about or picture "it"?

Some of the parts are , (tokens with specific properties to reduce its volatility), and , but there must be more and this simply seems to miss the bigger picture.

To help with scoping, maybe some explanations could be like How would I explain Ethereum to a non-technical friend?


Decentralized Finance (DeFi) is the movement that leverages decentralized networks to transform old financial products into trustless and transparent protocols that run without intermediaries.

Some may prefer to call DeFi as Open Finance, Distributed Finance, or EthFi(referring to the fact that at the moment most of existing DeFi products built on Ethereum.)

Also most likely we can count DeFi as a subset of Fintech. enter image description here

Here is a great overview of DeFi core components:

DeFi core components

I'd say that absolutely needed components for DeFi are:

  • Smart contracts enabled network itself
  • Stablecoins
  • Liquidity on DEXes, available for integrations with DeFi products
  • And most important is mature enough network-wide ecosystem, with dev tooling and users who could use those DeFi dApps.

Check defiprime.com for a list of defi products and defipulse.com for live stats.

| improve this answer | |
  • Welcome to the Ethereum Stack Exchange! :) Please check ethereum.stackexchange.com/help/how-to-answer and ethereum.stackexchange.com/questions/45/… for examples because typically a sentence and a link isn't the kind of answer that belongs on this site (maybe they would work for other sites like Reddit or Twitter). (Would like to upvote and accept your answer if it's the best, but can't do so at this time.) – eth Sep 5 '19 at 2:59
  • @eth thanks, I've improved my answer. Let me know how it works for you now? – Nick Sawinyh Sep 6 '19 at 19:39
  • 1
    Thanks, looks reasonable to me and I've accepted it. (Hope it does not discourage others though if they think they have other good explanations.) – eth Sep 21 '19 at 2:49
  • Why would a sane person take $100 in DAI, pay 8% yearly and give $150 in ETH as collateral? This doesn't make any sense to me – Toolkit Jun 22 at 7:02

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