# DeFi

> Decentralized finance — lending, trading and yield run by smart contracts instead of institutions, open to anyone with a wallet.

DeFi replaces the middleman with a program: a liquidity pool is the market maker, the lending protocol is the bank, the smart contract is the contract — enforced by code rather than by a legal department. Composability is the magic: protocols plug into each other like Lego, because every contract is a public API.

The same properties define the risk: code is law, so a bug is a bank robbery; there is no chargeback, no support line, and 'audited' is a necessary rather than sufficient defence. The yield that looks too good is usually pricing a risk that is not on the label.

## Related terms

- https://dfieldsolutions.com/en/glossary/smart-contract.md
- https://dfieldsolutions.com/en/glossary/smart-contract-audit.md
- https://dfieldsolutions.com/en/glossary/crypto-wallet.md

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Source: https://dfieldsolutions.com/en/glossary/defi
DField Solutions — Dunakeszi, Hungary — dezso@dfieldsolutions.com
Booking: see https://dfieldsolutions.com/en/contact