Decentralized Finance, or DeFi as it is widely known, enables financial services like borrowing, lending, and trading of assets without depending on centralized third parties.
Decentralized Applications, or DApps, running on the Ethereum network are what provide users with these new types of financial services.
The DeFi movement comprises many different solutions that intend to replace traditional finance institutions such as banks, insurance, money markets, bonds, and many other legacy finance offerings.
The possibilities are endless with DeFi DApps thanks to composability, a concept that is often referred to as 'money LEGOs.'
Usually DeFi users are required to lock collateral, in the form of tokens on Ethereum into smart contracts, which are essentially simple software programs deployed on the network.
Total Value Locked, or TVL, is the name given to the total collateral locked inside smart contracts as part of the decentralized finance ecosystem. Although DeFi is in its infancy, the TVL continues to grow at a rapid pace and can be tracked using a websites like DeFi Pulse.
