Users typically engage with DeFi via software called dapps (“decentralized apps”), most of which currently run on the Ethereum blockchain. Unlike a conventional bank, there is no application to fill out or account to open.

Here are some of the ways people are engaging with DeFi today:

• Lending: Lend out your crypto and earn interest and rewards every minute - not once per month.

• Getting a loan: Obtain a loan instantly without filling in paperwork, including extremely short-term “flash loans” that traditional financial institutions don’t offer.

• Trading: Make peer-to-peer trades of certain crypto assets — as if you could buy and sell stocks without any kind of brokerage.

• Saving for the future: Put some of your crypto into savings account alternatives and earn better interest rates than you’d typically get from a bank.

• Buying derivatives: Make long or short bets on certain assets. Think of these as the crypto version of stock options or futures contracts

What are the downsides?

• Fluctuating transaction rates on the Ethereum blockchain mean that active trading can get expensive.

• Depending on which dapps you use and how you use them, your investment could experience high volatility – this is, after all, new tech.

• You have to maintain your own records for tax purposes. Regulations can vary from region to region.