What is DeFi?
DeFi (decentralised finance) is a set of financial services, such as exchange, lending and borrowing, run by smart contracts on public blockchains rather than by banks or brokers. Users act from their own wallets, and the rules are visible in the code.
Also called: decentralised finance
Why it matters
For a company, DeFi is first of all a set of protocols that financial products are built on, and a set of new risks: code bugs, price manipulation and volatile collateral. Regulation depends on who controls the service and where its users are, so any such project starts with a lawyer, not with code.
1How it worksLiquidity pools hold users’ tokens, and smart contracts set prices, rates and collateral rules automatically.
2Main risksContract bugs, oracle manipulation, volatile collateral and unclear liability; audits reduce these risks but cannot remove them.
3Rules in KazakhstanThe Law on Digital Assets has no separate regime for DeFi: circulation of digital assets is allowed only in the cases the law lists.
ExampleAn AIFC participant licensed for digital asset services builds a risk monitoring dashboard. The system reads the state of pools and collateral from DeFi protocols’ smart contracts, compares it with internal limits and alerts the risk manager. The dashboard itself buys and transfers nothing.
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Related terms
Smart contractA program stored on a blockchain that runs automatically when its conditions are met.StablecoinA crypto token designed to keep a steady value, usually pegged to a fiat currency.DAOA group that makes decisions and manages shared funds through token votes and smart contracts.Crypto walletAn app or device that holds the keys to crypto assets and uses them to sign transactions.
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