DeFi on Ethereum

Taking out a loan, investing your money, saving securely, transferring funds, buying and selling assets. These are all actions that many people perform daily within the traditional financial system. However, along the way certain limitations appear that, far from improving our experience, make it more rigid and restricted: operating only on certain days and hours, transaction delays due to manual processes, high requirements to access services, contracts with fine print that almost never favor the user, unethical use of our personal data, and much more.

These are problems faced by those already inside the system. But what about the millions who cannot even access it? Informal workers, people without guarantees or support networks, overly complex paperwork, lack of financial education, lives far from urban centers, connectivity issues.

In short, the traditional financial system generates two types of exclusion: for those who are inside but under unfavorable rules, and for those who are simply left out.

Ethereum opens alternatives for both cases.

From Bitcoin to Ethereum: the beginning of DeFi

Decentralized Finance (DeFi) finds its first seed in Bitcoin. Having a digital money that works 24/7 was already a major breakthrough: sending and receiving payments without depending on schedules or banks.

The arrival of Ethereum expanded those possibilities. With smart contracts, it became possible to design programmable financial products, as diverse as the creativity of those who build them.

A smart contract is a program that does not live on a central computer, but runs on a decentralized network of nodes. Once deployed, it functions autonomously. Thus, on Ethereum, with code, you can establish that when a certain condition occurs — for example, a deadline is reached — a transfer is automatically made from one account to another. Once that condition is written into the contract, it will happen. There is no need for an employee or official to sign papers. It is software, it is code… and on the blockchain, code executes exactly as programmed.

From this comes the idea of programmable money, and with it, multiple uses that transform how we understand finance. From here dozens of applications emerged: some faded away, others consolidated, and many more continue to appear.

The key point is that more and more people can, through Ethereum, improve their financial situation, access greater freedom, and enjoy more privacy.

Participating in DeFi

To participate in DeFi, you don’t need to ask for permission or gather extensive documentation or references. You only need a crypto wallet and an internet connection. Instantly, you can send and receive money from anywhere in the world without anyone being able to stop it. But that’s just the starting point: on top of this foundation, countless other possibilities emerge thanks to smart contracts.

What can you do with DeFi today?

Participating in DeFi doesn’t require permission or mountains of paperwork. All you need is a wallet and an internet connection. From there, a wide range of possibilities opens up:

Common options

• Staking: Put your tokens to work in a Proof of Stake blockchain. By doing so, you help the network remain secure and, in return, earn rewards.
• Yield farming: Move your funds across different DeFi protocols to take advantage of the best opportunities for yield and incentives.
• Compounding: When the earnings you generate are automatically reinvested to create more returns. It’s “interest on interest.”
• Lending & borrowing: Lend or borrow crypto through smart contracts, without banks or intermediaries. Normally, collateral is required to secure the loan.
• Trading: Buy, sell, or swap cryptocurrencies on decentralized exchanges (DEXs).

More advanced options

• Liquidity provision: Provide liquidity in pools such as Uniswap or Curve and earn fees every time someone trades.
• Stablecoins: Use stablecoins like USDT, DAI, or USDC to save or transact without volatility. In LATAM they are widely used as a hedge against inflation.
• Derivatives and synthetics: Access assets that replicate stocks, commodities, or indices on the blockchain.
• On-chain insurance: Cover risks such as smart contract hacks through decentralized protocols.
• Automated asset management: Delegate investment strategies to protocols that optimize yields.
• RWA (Real World Assets): Participate in the tokenization of real-world assets such as bonds, invoices, or properties, integrated into the DeFi ecosystem.
• Real-time payments and payroll: It’s now possible to stream salary payments, releasing money continuously to the worker without friction.

As we can see, the forms DeFi takes are multiple and diverse. What has been presented here is just a sample of the ways you can invest or generate returns on Ethereum. The most remarkable point is that the possibilities are practically limitless. Ethereum is permissionless: you don’t need authorization from anyone to create or use a protocol. If someone imagines a new way to earn yield on the blockchain and has the technical means, they can make it happen. Can you imagine that in the traditional financial system? Highly unlikely.

Risks and best practices

So far, we’ve looked at the advantages and opportunities of decentralized finance. But it’s also important to address the risks, which are very real.

First, when operating in DeFi, we are moving money through devices connected to the internet. This opens the door to viruses, hacks, or scams based on social engineering (like phishing). In addition, the smart contracts we interact with can have flaws or vulnerabilities: not all are equally secure. This is why the reputation of a protocol matters a lot, although even the most recognized projects are never 100% risk-free.

On top of this, the nature of crypto assets themselves must be remembered: their prices are highly volatile. Investing without being aware of this can result in significant losses.

Basic tips for getting started in DeFi more safely:

• Don’t trust, verify: don’t blindly trust what you read or hear; look for proof, audits, and reliable sources.
• DYOR (Do Your Own Research): investigate on your own before investing; understand what each protocol does.
• Never invest more than you can afford to lose: risk is always present.
• Be skeptical of magical promises: if something sounds too good to be true, it probably is.
• Diversify: both your investments and your security measures (wallets, passwords, devices).

The current size of DeFi

Decentralized Finance is no longer a promise; it is a working system where tens of billions of dollars move every day.

• According to DefiLlama, on Ethereum alone there are more than $91 billion locked in DeFi protocols (TVL, Total Value Locked).
• According to DappRadar (September 2025), the leading Ethereum protocols by TVL include Lido (≈$38.7B), Aave V3 (≈$34.7B), EigenLayer (≈$19.8B), Ethena (≈$15.4B), Etherfi (≈$12.3B), and Pendle (≈$11.3B), offering services such as staking, lending, and liquidity provision.

These numbers reflect the magnitude of the infrastructure that already exists: open, auditable protocols that today move more capital than many traditional banks in entire countries.

At Eth Kipu, we are proud to train hundreds of Solidity developers. They graduate from our courses with the knowledge needed to start working on various DeFi applications as well as many other areas of Ethereum. Likewise, through our ongoing educational work on social media and introductory courses, we aim for more and more users to start benefiting from this technology.

More information on DeFi at https://ethereum.org/en/defi/