AION Explained
DeFi for Beginners
Decentralized finance uses smart contracts to provide trading, lending and other financial functions on public networks. Open access does not remove code, economic, governance, oracle or user-error risk.
Applications are composed from contracts
A DeFi interface usually connects a wallet to smart contracts. The website is not the complete system: contracts, oracles, tokens, governance and underlying networks may each be operated or upgraded differently.
Trading and liquidity pools
Automated market makers quote prices from pooled assets and formulas. Liquidity providers earn fees but can experience inventory changes, impermanent loss, token depreciation and contract failure. A displayed annual rate can change quickly.
Borrowing requires collateral and monitoring
Many lending protocols require collateral worth more than the loan. If collateral value falls past a threshold, automated liquidation can occur. Network congestion or oracle problems can make it difficult to act during volatile periods.
Build a dependency map
Before depositing, list the chain, wallet, token issuer, bridge, oracle, contracts, administrators and front end involved. Check audits, upgrade keys, incident history and withdrawal conditions. A failure in one layer can affect the whole position.
Frequently asked questions
Does a DeFi protocol remove all intermediaries?
Not necessarily. Interfaces, developers, governance, oracles, bridges, stablecoin issuers and administrators can remain important dependencies even when settlement uses smart contracts.
Primary references
These references define the protocol, product or safety concepts used in this guide. They are provided for verification, not as endorsements.
Educational content only. This page does not recommend buying, selling or holding any asset. Verify current product, tax and regulatory details for your jurisdiction.