According to a commonly spread definition, decentralized finance or DeFi is

the movement that leverages open source software and decentralized networks to transform traditional financial products into trustless and transparent protocols that operate without unnecessary intermediaries.

Effectively that means that DeFi reflects traditional financial tools built on a distributed ledger technology and blockchain (better not confusing these concepts). They are mostly open-source protocols or modular frameworks (like Hyperledger Fabric) that aim at creating and issuing digital forms of real-life assets, and which is more, tokenizing assets that previously wouldn’t be presented in a digital form.

Up to now, there is a great number of ways decentralized finance can emanate to the world. Here is what stands under a buzzword “decentralized finance”:

Asset Management Tools

Tokenization Protocols

Decentralized Exchanges

Stablecoins

Derivative Protocols/Prediction Markets

KYC/Identity Protocols

And indeed, many more of them.

In essence, by putting financial services on more reliable and advanced rails, DeFi empowers the financial system to become faster, cheaper, much more efficient and globally accessible. Some people describe DeFi as the Internet of Money — hopefully, I cannot afford that banality.

DeFi ≠ Fintech

Even though for a number of resemblances it might seem that DeFi means Fintech — congrats, you got served. For the purpose of nurturing those particularly curious, I took this image from Tobia De Angelis:

The basic thing you can find here is the following: o-p-e-n_s-o-u-r-c-e.

DeFi is essentially about building open-source software, whereas Fintech (you can put here a long list of N26, Revolut, Monzo, Tinkoff, etc.) are proprietary-based. There’s something beautiful in that surge for community-driven software development — I am not saying I would argue it’s better than corporate-based, but it really differs. And I believe it makes a great deal to the better world and much more accessible services for all of us.