DeFi: follow the money and the risk
A practical introduction to decentralised finance, where returns come from, and the risks behind them.
Key takeaway
Before using a service, explain where returns come from, how withdrawals work and how you could lose money. If you cannot, keep learning first.
Financial actions in code
Decentralised finance uses smart contracts for activities such as swapping, lending and borrowing. Access often begins through a wallet.
Pools make activity possible
Some services pool assets so others can trade or borrow. Returns may come from fees, interest or token incentives.
Yield has a source and a risk
Risks include software failures, price changes and liquidation of collateral. A displayed yield is not a promised return.
Understand where returns come from
Before using a service, explain where returns come from, how withdrawals work and how you could lose money. If you cannot, keep learning first.
Check the source
Authoritative material used to verify the safety guidance in this article.