What is DeFi in 2025? Beginner's Guide

I. What is DeFi? (One-Sentence Definition)

DeFi = Bankless Financial System, replacing banks and brokers with code to automatically execute financial services like deposits, loans, trading, insurance, etc. (Permissionless, globally open, transparent and verifiable)

II. Real Scale of DeFi in November 2025 (Data Speaks)

• Total Value Locked (TVL): $136 billion (down 21% from October's peak of $172 billion, mainly due to the Balancer and Stream Finance security incidents in early November)

• Peak Daily Trading Volume: $30 billion (Solana and Ethereum contribute the most, with Solana averaging over $5 billion daily)

• User Scale: Approximately 21 million unique addresses (85% growth over the past 12 months)

Market Landscape: The Big Four Lead (All with TVL over $10 billion)

• Aave (Lending): $39 billion, supports 18 chains, deposit APY 3-6%DefiLlama

• Lido (Liquid Staking): $26.5 billion, top choice for ETH staking, APY 4-5%

• Uniswap V4 (DEX): Daily trading volume breaks $5 billion, 0.01% low-fee pools become mainstream

• Curve (Stablecoin DEX): Second in TVL ranking, top choice for stablecoin trading, low slippage

III. Core DeFi Sectors (6 Truly Practical Sectors in 2025)

1️⃣ Decentralized Exchanges (DEX): Token Swaps + Liquidity Earning

Main Protocols: Uniswap V4, Curve 3pool, Aerodrome (Base), PancakeSwap V3 Core Play:

• Token Swaps: Save 30-50% on fees compared to centralized exchanges, no KYC restrictions, instant settlement

• Provide Liquidity: Deposit trading pairs (e.g., USDC/USDT) to become LP, earn trading fees (APY 4-8%, almost no IL risk)

• 2025 Innovations: Uniswap V4's "Dynamic Fee Model" and "BentoBox Vault", improving asset reuse efficiency by 40%

2️⃣ Lending Protocols: Deposit Interest + Collateralized Borrowing

Main Protocols: Aave V3, Compound V3, Morpho Blue, Spark (DAI exclusive) Real Yields:

• Deposits: Stablecoins 3-6% (Aave V3 USDC ~4.2%), higher for volatile assets

• Borrowing: 5-10% (depending on collateral type and LTV) 2025 Highlights: Aave launches "Credit Delegation" feature, allowing cross-chain use of collateral, with institutional users over 40%

3️⃣ Liquid Staking: Staking + Liquidity Double Harvest

Main Protocols: Lido (ETH), Jito (SOL), Rocket Pool Core Value: Stake ETH/SOL to get stETH/mSOL, enjoy staking yields (4-5%) while using it as collateral for secondary utilization in DeFi Market Position: TVL accounts for 25% of total DeFi, one of the fastest-growing sectors in 2025

4️⃣ Real World Assets (RWA): On-Chain Traditional Assets

Main Protocols: Ondo (US Treasuries), Centrifuge (Corporate Invoices), Maple (Institutional Lending) Yield Situation:

• US Treasury types: APY 4.5-5.3% (Ondo USDY ~5.1%, higher than traditional banks)

• Corporate Invoices: APY 8-12% (higher risk, 2025 first-half security incidents caused $14.6 million in losses) Note: 37 fake RWA projects exposed in 2025, losses over $100 million; verify audit reports and real asset proofs

5️⃣ Perpetual Contracts (Decentralized Version): Leveraged Trading + Shorting

Main Protocols: GMX V2, Gains Network, dYdX V4 Core Advantages:

• Up to 50x leverage, fees 30-50% lower than centralized platforms

• No KYC restrictions, 24/7 trading, globally accessible

• 2025 New Features: Prediction market module, daily derivatives trading volume breaks $300 million

6️⃣ Yield Aggregators: Automated Wealth Management Robots

Main Protocols: Yearn Finance, Beefy, Sommelier Core Functions: Users deposit funds, system automatically finds the highest-yield strategies across the network (e.g., auto-compounding, cross-protocol arbitrage) 2025 Innovations: Risk-tiered products, divided into conservative (4-6%), balanced (6-12%), and aggressive (12-25%) tiers, suitable for different risk preferences

IV. 2025 Beginner Path Starting with $1,000 (Practical Edition)

1️⃣ Preparation (Done in 10 Minutes)

• Wallet Choice: MetaMask (browser extension) or Rabby (mobile), create and back up 12-word mnemonic ( Never screenshot and store on phone )

• Small Amount of Funds: Prepare $50-100 in ETH/BNB for gas fees (L2 chains like Base/Arbitrum cost only $0.1-1 per operation)

• Stablecoins: Buy $1,000 USDC or DAI via centralized exchanges (Binance / OKX), withdraw to wallet

2️⃣ Fund Allocation Plan (APY 5-9%, Extremely Low Risk)

Operation Steps:

1. Stablecoin Deposit: Open Aave V3 (Base chain) → Connect wallet → "Deposit" → Select USDC → Enter 500 → Confirm (Gas fee < $1)

2. Liquidity Mining: Curve Finance → Select 3pool (USDT/USDC/DAI) → "Add Liquidity" → Enter 300 USDC → Confirm → Deposit LP tokens into Convex for extra rewards

3. Liquid Staking Investment: Swap 200 USDC for stETH via Uniswap → Deposit into Lido staking contract → Receive stETH (usable for other DeFi lending)

Yield Expectations: Annual passive income $50-90 (monthly average $40-75), fund volatility risk < 5%, suitable for complete beginners to practice

V. 4 Major Risks to Beware of in 2025 (Lessons from Blood)

1️⃣ Smart Contract Vulnerabilities: The Nightmare of Instant Wipeout

Case: On November 3, 2025, Balancer V2 was attacked due to a "rounding error" vulnerability, losing $128 million, involving mainstream assets like WETH and wstETH

Prevention:

• Only choose Top 10 TVL + Audited 3+ times protocols (e.g., Aave, Lido, Uniswap)

• Reject any "newly launched high-yield" projects (APY > 20% is basically a scam)

• Small amounts diversified across investments, no single protocol exceeding 30% of total funds

2️⃣ Impermanent Loss (IL): The Demon of Impermanence

Principle: When the price of deposited tokens fluctuates significantly, liquidity providers lose part of their asset value

Prevention:

• Stablecoin pools (e.g., 3pool) have IL risk < 1%, safe to participate

• Absolutely avoid putting volatile coins (e.g., ETH/BTC) into stablecoin pools (IL could reach 10-30%)

• For volatile coin liquidity, only choose same-type token pools (e.g., ETH/wETH, BTC/wBTC)

3️⃣ Gas Fee Traps: Transaction Killers

Current Situation: Ethereum mainnet peaks can reach $50 per transaction, higher than the trade amount

Prevention:

• Beginners only operate on L2 chains (Base, Arbitrum, Optimism), single fees < $1

• Avoid operating during extreme market volatility (gas fees can surge 10x+)

• Use MetaMask's "Gas Fee Monitoring" feature to set reasonable limits

4️⃣ Yield-Bearing Stablecoin Risks: 2025's Biggest Hidden Mine

Case: In November 2025, yield-bearing stablecoins like Stream Finance's xUSD and Elixir's deUSD collapsed within a week, with $1 billion in outflows

Characteristics: Claiming "APY 15-20%+ stablecoins" using "Delta-neutral hedging strategies", but reserves and trading details are opaque

Prevention: Completely avoid any projects promising "fixed high yields + stablecoins"; 2025 has confirmed 99% of such models are Ponzi schemes or high-risk leveraged games

VI. One-Sentence Summary (Latest Positioning in November 2025)

DeFi has evolved from a casino into a global bankless bank; its most practical value for ordinary people is: turning idle stablecoins into 4-8% APY, higher than any traditional bank deposit, and withdrawable anytime.

November 2025 Action Checklist:

1. Download MetaMask, create wallet and back up mnemonic

2. Deposit $1,000 USDC to wallet

3. Allocate diversified investments as above to start passive yields

4. Check yields monthly, rebalance assets quarterly

5. Absolutely avoid any "APY 20%+" projects; that's the scythe beckoning

Final Reminder: DeFi is not a get-rich-quick tool, but a new choice for asset preservation and appreciation. The market turbulence in November 2025 tells us: Safety first, yields second; don't touch what you don't understand, diversify investments—that's the way to survive in this bankless world.