How it works

You connect a self custody wallet to an app and interact with its smart contracts directly. A decentralized exchange swaps tokens from shared liquidity pools; a lending protocol lets you deposit coins to earn interest or borrow against collateral. Everything runs around the clock and anyone with a wallet can join.

Risks

Bugs in smart contracts, hacks, failing oracles, depegging stablecoins and sudden liquidations can all cost money. There is usually no customer support and no deposit insurance. Total value locked shows how much money sits in DeFi apps and is a common health gauge.