# What is Decentralized Finance?

<mark style="color:$info;">The</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**financial industry**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">is undergoing a period of foundational change — much of it driven by</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**new types of financial technology (FinTech)**</mark><mark style="color:$info;">.</mark>\ <mark style="color:$info;">One of the most</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**groundbreaking sectors**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">of FinTech is</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**blockchain technology**</mark><mark style="color:$info;">.</mark>

<figure><img src="https://2773531205-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FwPYQpCxrPJoaRvqUIVza%2Fuploads%2Fk8XAoUr5FBdIg0ji1Pbn%2FWhat%20is%20Decentralized%20Finance_.png?alt=media&#x26;token=87b26efa-3927-4671-b80f-b4af4b2545f4" alt=""><figcaption></figcaption></figure>

### 🚀 Enter DeFi

**Decentralized Finance (DeFi)** is enabling entirely new financial products and services that:

* Reduce reliance on legacy gatekeepers
* Bypass traditional financial stakeholders
* Eliminate abuse of power through transparency and automation

***

## 📘 What Is DeFi?

{% tabs %}
{% tab title="In a nutshell" %} <mark style="color:$primary;">🧾</mark> <mark style="color:$primary;"></mark><mark style="color:$primary;">**DeFi**</mark> <mark style="color:$primary;"></mark><mark style="color:$primary;">is an</mark> <mark style="color:$primary;"></mark>*<mark style="color:$primary;">open financial ecosystem</mark>* <mark style="color:$primary;"></mark><mark style="color:$primary;">of applications that run on top of blockchain technology.</mark>

<mark style="color:$info;">The goal of DeFi is to</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**replace traditional middlemen**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">(banks, brokers, etc.) with:</mark>

* <mark style="color:$info;">**Automation**</mark>
* <mark style="color:$info;">**Transparent processes**</mark>
* <mark style="color:$info;">**Decentralized infrastructure**</mark>

<mark style="color:$info;">DeFi applications use:</mark>

* <mark style="color:$info;">**Blockchain technology**</mark>
* <mark style="color:$info;">Often,</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**smart contracts**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">— making processes</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**automated**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">and</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**trustless**</mark>

<mark style="color:$info;">This allows users to:</mark>

* <mark style="color:$info;">Access financial services</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**directly**</mark>
* <mark style="color:$info;">Skip banks or centralized financial institutions</mark>
  {% endtab %}

{% tab title="Extensive" %} <mark style="color:$info;">In the most basic sense, DeFi is an open financial ecosystem of apps that run on top of blockchain technology. The goal is to replace middlemen in traditional financial systems (like lending, borrowing, derivatives, and exchange) with automation and transparent processes. DeFi refers to financial services and applications that use blockchain technology and often smart contracts, which make them automated and trustless (decentralized). By using decentralized protocols and smart contracts, DeFi can offer a wide range of financial products and services without the need for centralized intermediaries. This means that users can access various financial services directly, without having to go through a bank or other financial institution.</mark>
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***

## 🔐 Custody & Control in DeFi

{% tabs %}
{% tab title="In a nutshell" %} <mark style="color:$primary;">✅ Most DeFi solutions are</mark> <mark style="color:$primary;"></mark><mark style="color:$primary;">**non-custodial**</mark>

<mark style="color:$info;">This means:</mark>

* <mark style="color:$info;">DeFi protocols</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**do not hold your funds**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">like a bank does</mark>
* <mark style="color:$info;">Users maintain</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**full control**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">over their assets</mark>
* <mark style="color:$info;">Funds can be moved</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**at any time**</mark><mark style="color:$info;">, without permission</mark>

<mark style="color:$info;">You can use DeFi for:</mark>

* <mark style="color:$info;">Lending</mark>
* <mark style="color:$info;">Borrowing</mark>
* <mark style="color:$info;">Staking</mark>
* <mark style="color:$info;">Other financial instruments</mark>

<mark style="color:$info;">All</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**on your own terms**</mark><mark style="color:$info;">, via:</mark>

* <mark style="color:$info;">A</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**mobile wallet**</mark>
* <mark style="color:$info;">A</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**DeFi-enabled desktop app**</mark>

{% hint style="info" %}
DeFi gives users **real-time access and control** over their financial activity.
{% endhint %}
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{% tab title="Extensive" %} <mark style="color:$info;">The majority of DeFi solutions function without the use of custodians. This implies that they do not keep your money in the same way a bank does. Users may utilize any number of financial instruments (DeFi lending, DeFi borrowing, DeFi staking, and more) on their own terms instead of depending on centralized exchanges or systems and remove their funds at any time if they choose to. Users can access and manage their DeFi funds in real-time through a mobile wallet or a DeFi application on their computer or mobile device, which provides them significant control over their investment decisions.</mark>
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***

## 🌍 Open and Censorship-Resistant

{% tabs %}
{% tab title="In a nutshell" %} <mark style="color:$info;">One of the key benefits of DeFi:</mark>

* <mark style="color:$info;">**Open to anyone**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">with an Internet connection</mark>
* <mark style="color:$info;">**Censorship-resistant**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">by design</mark>
* <mark style="color:$info;">**No central authority**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">to restrict participation</mark>

> <mark style="color:$info;">👥 Anyone can:</mark>
>
> * <mark style="color:$info;">Be a user</mark>
> * <mark style="color:$info;">Be a liquidity provider</mark>
> * <mark style="color:$info;">Or be both</mark>

<mark style="color:$info;">Regardless of:</mark>

* <mark style="color:$info;">Geographic location</mark>
* <mark style="color:$info;">Economic status</mark>
  {% endtab %}

{% tab title="Extensive" %} <mark style="color:$info;">One of the most important characteristics of DeFi is that it is open and accessible to anyone with an Internet connection. By its very nature, DeFi is also censorship-resistant because there is no central point of control. This means that financial services built on DeFi protocols can be used by anyone, regardless of their location or economic status. Anyone can be either a user, a liquidity provider, or both.</mark>
{% endtab %}
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***

## 🔗 What Is Onchain Finance?

{% tabs %}
{% tab title="In a nutshell" %} <mark style="color:$primary;">🧭</mark> <mark style="color:$primary;"></mark><mark style="color:$primary;">**Onchain Finance**</mark> <mark style="color:$primary;"></mark><mark style="color:$primary;">represents the</mark> <mark style="color:$primary;"></mark><mark style="color:$primary;">**next evolution**</mark> <mark style="color:$primary;"></mark><mark style="color:$primary;">of DeFi.</mark>

<mark style="color:$info;">It builds on DeFi's foundation — decentralization, transparency, and user control — but takes it further:</mark>

<mark style="color:$info;">🔄 Full Onchain Integration</mark>

<mark style="color:$info;">While DeFi focuses on:</mark>

* <mark style="color:$info;">**Specific dApps and smart contracts**</mark>

<mark style="color:$info;">**Onchain Finance**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">delivers:</mark>

* <mark style="color:$info;">A</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**holistic ecosystem**</mark>
* <mark style="color:$info;">Where</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**every operation**</mark> <mark style="color:$info;"></mark><mark style="color:$info;">— transactions, assets, services — is</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**natively on-chain**</mark>

<mark style="color:$info;">Includes:</mark>

* <mark style="color:$info;">Payments</mark>
* <mark style="color:$info;">Savings</mark>
* <mark style="color:$info;">Investments</mark>
* <mark style="color:$info;">Business tools</mark>

<mark style="color:$info;">No reliance on</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**offchain intermediaries**</mark><mark style="color:$info;">.</mark>
{% endtab %}

{% tab title="Extensive" %} <mark style="color:$info;">Onchain Finance represents the next evolution of DeFi, taking the principles of decentralization, transparency, and user control to a broader, more integrated level by embedding all financial operations directly onto a blockchain. While DeFi focuses on specific decentralized applications and smart contracts, Onchain Finance encompasses a holistic ecosystem where every transaction, asset, and service (payments, savings, investments, and business tools) resides natively on the blockchain, eliminating reliance on offchain intermediaries entirely.</mark>&#x20;
{% endtab %}
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***

## 💰 Onchain Finance at Anodos Labs

<mark style="color:$primary;">At</mark> <mark style="color:$primary;"></mark><mark style="color:$primary;">**Anodos Labs**</mark><mark style="color:$primary;">, we define Onchain Finance as:</mark>

> *<mark style="color:$primary;">“The future of money management, where traditional financial barriers are dismantled, and individuals and businesses gain unparalleled access and autonomy.”</mark>*

<mark style="color:$info;">Onchain Finance is:</mark>

* <mark style="color:$info;">Integrated</mark>
* <mark style="color:$info;">Decentralized</mark>
* <mark style="color:$info;">Accessible</mark>
* <mark style="color:$info;">Empowering</mark>

<mark style="color:$info;">It aims to replace not just parts of finance, but</mark> <mark style="color:$info;"></mark><mark style="color:$info;">**entire systems**</mark><mark style="color:$info;">, entirely on the blockchain.</mark>