Lecture 1.2 What is DeFi

The speaker defines finance as the creation, management, and investment of money and financial assets, including various instruments like stocks and bonds, and services such as banking and lending. Traditional finance relies on centralized institutions like banks, which hold custody of funds, act as intermediaries, charge fees, and are highly regulated, leading to a lack of customer privacy and a need for trust. The introduction of Bitcoin in 2008 and Ethereum in 2014, with its smart contract capabilities, ushered in decentralized finance (DeFi). DeFi is presented as an open, permissionless, and interoperable protocol stack built on public smart contract platforms, characterized by users maintaining full custody of their assets and the absence of single-entity censorship over transactions or protocol execution.