DeFi vs Traditional Finance
Plain English
Traditional finance uses banks, credit cards, and financial institutions as middlemen for transactions. DeFi (Decentralized Finance) uses smart contracts instead of middlemen - you can lend, borrow, and trade directly with others through code, often with better rates and 24/7 access.
Technical
Traditional finance (TradFi) relies on centralized institutions (banks, exchanges, clearinghouses) for intermediation, custody, and settlement. DeFi eliminates intermediaries through programmable smart contracts, enabling permissionless access, transparent operations, composable protocols, and global liquidity. Trade-offs: DeFi offers innovation and accessibility but currently has higher technical complexity and smart contract risks.