What is Defi

Decentralized finance, or DeFi, is the ecosystem of financial applications being built with blockchain technology. In DeFi financial products become available on a public decentralized blockchain network. That makes them open to anyone to use, rather than going through middlemen like banks or brokerages.

DeFi refers to a system by which software written on blockchains makes it possible for buyers, sellers, lenders, and borrowers to interact peer to peer or with a strictly software-based middleman rather than a company or institution facilitating a transaction.

Unlike a bank or brokerage account, a government-issued ID, Social Security number, or proof of address are not necessary to use DeFi.

DeFi relies on Smart Contracts that automate agreement terms between buyers and sellers or lenders and borrowers making these financial products possible. Regardless of the technology or platform used, DeFi systems are designed to remove intermediaries between transacting parties.

Total value locked (TVL) is a metric that is used to measure the overall health of the DeFi and yielding market. Total value locked represents the number of assets that are currently being staked in a specific protocol: this value is not meant to represent the number of outstanding loans, but rather the total amount of underlying supply that is being secured by a specific application by DeFi completely.

The image below shows the evolution of the TVL in DeFi protocols from 2019. As it can be appreciated, DeFi is a high-growth market whose TVL is growing at 15.8% Month on Month.