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How do Decentralized Finance (DeFi) applications work?

Decentralized Finance (DeFi) applications function on blockchain networks using smart contracts to create a trustless and transparent financial ecosystem. Users can access these applications directly through web-based interfaces or decentralized wallets, enabling various financial activities like decentralized exchanges, lending, borrowing, and yield farming. The interoperability of DeFi applications allows them to integrate and interact with other protocols, fostering innovation and new financial products. However, users should be cautious of potential risks associated with smart contract vulnerabilities and exercise due diligence when participating in DeFi activities.