DeFi, short for decentralized finance, refers to financial services that run on smart contracts instead of through banks or brokers. Lending, trading, borrowing, and earning yield all happen through code that anyone can use without opening an account or asking permission.
Scale conveys both the promise and the volatility. Total value locked across DeFi protocols peaked near $177 billion in late 2021, and by June 2026 had fallen to roughly $70 billion after declining every month that year.
What makes it "decentralized"
Three properties, in practice.
No account. You connect a wallet. There is no sign-up, no approval, and nobody who can close your access.
No intermediary holding funds. Assets sit in smart contracts governed by public code rather than on a company's balance sheet.
Open and composable. The code is visible, and protocols plug into each other. One application can use another's liquidity without a partnership agreement, which is why DeFi is sometimes described as money legos.
Actual decentralization varies enormously between protocols. Many have admin keys, upgradeable contracts, or governance concentrated among a few holders.
What you can actually do
| Service | How it works | Examples |
|---|---|---|
| Trading | Swap tokens against liquidity pools using an [AMM](/en/cryptopedia/amm-automated-market-maker) | Uniswap, Curve, PancakeSwap |
| Lending and borrowing | Deposit collateral, borrow against it, rates set by pool utilization | Aave, Morpho, Compound |
| Liquid staking | Stake an asset and receive a tradable token representing the position | Lido, Jito |
| Stablecoins | Issue dollar-pegged tokens against on-chain collateral | Sky (DAI), Liquity |
| Derivatives | Perpetual and options markets running on-chain | Various protocols |
By size, lending sits second only to liquid staking, and both run on blockchain infrastructure anyone can inspect. DefiLlama tracked more than 380 active lending protocols across 80+ chains in April 2026, with the top ten holding 78% of deposits.
How lending works without a credit check
Worth explaining, since it is the least intuitive part.
Traditional lending assesses whether you will repay. Unable to identify you at all, DeFi lending does not. Overcollateralization replaces the credit check: borrow $70 and you must deposit perhaps $100 of collateral first.
If your collateral value falls below a set threshold, anyone can trigger a liquidation, selling it to repay the loan and collecting a fee. That process is automatic and runs continuously.
Why anyone would lock $100 to borrow $70 is the obvious question. Common answers include accessing liquidity without selling a position, and borrowing stablecoins against an asset you want to keep holding. Aimed at people who already hold crypto, it is a different product from a bank loan.
The risks
DefiLlama's hack tracker records $7.6 billion in cumulative DeFi losses, and lending protocols account for roughly 28% of that.
- Smart contract risk. A bug can drain a protocol entirely. Audits reduce this and do not eliminate it.
- Key and operational risk. The largest 2026 exploit, roughly $292 million from Kelp DAO in April, involved no contract flaw at all. Attackers compromised infrastructure and fed a bridge false data.
- Oracle risk. Protocols read prices from external feeds. A manipulated or stale feed can trigger wrongful liquidations.
- Liquidation risk. Collateral positions can be closed automatically during a sharp move, at whatever price is available.
- Governance risk. Concentrated token holdings can push through changes that benefit large holders.
- No recourse. Unlike a regulated exchange, funds lost to an exploit or a mistake are generally gone. There is no support desk and no deposit insurance.
- Regulatory uncertainty. How DeFi protocols and their developers are treated legally continues to change by jurisdiction.
What TVL does and does not tell you
Standard as it is for measuring a protocol's size, total value locked is frequently misread.
TVL is denominated in dollars, so it moves with prices. When crypto falls 20%, every protocol's TVL falls roughly 20% on paper even if not one user withdrew. Much of the 2026 decline reflects exactly that rather than a proportional exodus.
Nothing in it indicates whether the capital is sticky, either. Liquidity chasing token incentives leaves when the incentives stop, and it counts identically to capital that would stay regardless.
Methodology matters too. Depending on whether liquid staking tokens, restaking, and Bitcoin DeFi are included, total DeFi TVL in April 2026 could be reported anywhere between roughly $95 billion and $140 billion. Same market, different definitions.
DeFi vs traditional finance
| DeFi | Traditional finance | |
|---|---|---|
| Access | Anyone with a wallet | Account approval and identity checks |
| Hours | Continuous | Business hours and settlement cycles |
| Custody | You hold your keys | Institution holds your assets |
| Transparency | All activity public on-chain | Internal ledgers, periodic reporting |
| Recourse | Effectively none | Regulators, insurance, courts |
| Credit | Overcollateralized only | Underwriting and unsecured lending |
Where mb.io fits
DeFi and a regulated exchange answer different questions. One removes the intermediary and everything that comes with it, including the recourse. The other keeps the intermediary and holds it accountable through licensing.
mb.io is a regulated crypto spot exchange backed by MultiBank Group, a financial institution founded in 2005 that serves more than 2 million clients across 100+ countries.
- Regulated by VARA in the UAE and AUSTRAC in Australia
- 10/10 security score from Hacken, an independent blockchain security auditor
- Institutional-grade MPC custody powered by Fireblocks, with segregated client funds
- Spot only, so you own what you buy and there are no positions to liquidate
- Buy, sell, and swap in three steps, from sign-up to purchase
- 24/7 customer support, on web and on the iOS and Android apps
Open your account and start trading on mb.io.
Frequently asked questions
What does DeFi stand for?
Decentralized finance. The term describes financial services running on smart contracts rather than through banks, brokers, or other intermediaries.
Is DeFi safe?
It removes custody risk and replaces it with smart contract risk, oracle risk, and no recourse when something fails. DefiLlama's hack tracker records $7.6 billion in cumulative losses across the sector.
Do I need to complete KYC for DeFi?
Generally not, since there is no company to onboard you. Regulators have been extending obligations toward interfaces and developers, and the position varies considerably by jurisdiction.
How do DeFi loans work without credit checks?
Through overcollateralization. You deposit more value than you borrow, and if the collateral falls below a threshold it is liquidated automatically to repay the loan.
What is TVL?
Total value locked, the dollar value of assets deposited in a protocol. It moves with prices, so it falls when the market falls even without withdrawals, and different providers include different categories in the total.
Why did DeFi TVL fall so much in 2026?
Two reasons together. Prices fell across the market, which reduces dollar-denominated TVL mechanically, and a run of exploits pushed capital out. TVL declined from roughly $115 billion in January to about $70 billion by June 2026.
What is the difference between DeFi and a centralized exchange?
A centralized exchange is a company that holds your funds, verifies your identity, and can be held accountable by a regulator. DeFi protocols hold no accounts, verify nobody, and offer no recourse.
