ELI5: What is decentralized finance

Decentralized finance (DeFi) is like a bank that everyone can share and control, instead of just a few people.

Imagine your piggy bank. Right now, only you decide what happens to the money inside. A regular bank is like a giant piggy bank owned by some grown-ups. They decide who can borrow money and how much interest they pay.

DeFi is different. It's a shared piggy bank, but it's on the computer! It uses special computer programs called smart contracts to manage everything. Think of a smart contract as a set of rules written in stone (or, in this case, code) that everyone agrees on.

Here's how it works in everyday life:

• Borrowing money: Imagine you need money to buy a new bike. Instead of asking a regular bank, you could go to a DeFi lending platform. People who have extra money can lend it out, and the smart contract makes sure you pay them back, usually with a little extra (interest).
• Saving money: You can put your money into a DeFi platform and earn interest, just like a savings account.
• Trading: If you have toys (like baseball cards) and want to trade them for other toys (like action figures), you can use a DeFi exchange. It's like a swap meet, but the smart contract makes sure everyone gets a fair deal.

• More access: Anyone with a computer and internet can use DeFi, even if they don't have a bank account.
• Transparency: All the rules are written in code, so everyone can see how things work.
• Potentially higher returns: You might earn more interest on your savings than at a regular bank.