A DeFi protocol is a set of rules and smart contracts that run on blockchain technology to provide financial services without relying on traditional banks or intermediaries. Instead of going through a bank, users interact directly with the protocol to do things like borrowing, lending, trading, or earning interest on their crypto assets. These protocols are open-source, meaning anyone can inspect, use, or even modify the code if they know what they’re doing.

DeFi protocols operate on blockchain networks, where smart contracts automate processes and ensure transparency. Because they’re decentralized, users retain control over their assets rather than handing them over to a centralized organization. Everything runs on algorithms and code, cutting out middlemen and, in theory, making transactions faster and cheaper.