DeFi (Decentralized finance) is a general term denoting various financial applications based on the blockchain and cryptocurrencies that are aimed at creating an alternative financial system that works without intermediaries.
When any such DeFi applications are created, equal participants of the community have access to copies of their transaction histories. Consequently, the transactions are not controlled by any centralized body, which means that they cannot be altered or falsified.
In terms of functional potential, DeFi applications offer the full range of traditional financial instruments, but often provide a higher income due to the lack of financial intermediaries.
There are no access restrictions – anyone, including those who do not have access to the resources of the conventional banking system, can use DeFi potentials.
The DeFi industry is relatively young, and the amount of funds in financial applications is changing rapidly due to various factors. For example, the spring 2022 liquidity crisis in Terra, a large DeFi ecosystem, led to a significant outflow of funds from DeFi, and the total value locked (TVL) decreased from $250 mln to $76 mln. However, this isn’t the first time such things have happened in DeFi networks.
The TVL amount in DeFi can be monitored using, for instance, the DeFi Llama platform. In its research on DeFi, the Messari analytical agency claims that the “economy of users,” in contrast to the traditional “economy of institutions,” will grow by several orders of magnitude by 2030.