Definition ∞ Decentralized digital banking refers to financial services that operate without traditional central authorities, leveraging blockchain technology and smart contracts. This system aims to provide banking functions, such as lending, borrowing, and asset management, directly to users through peer-to-peer networks. It removes intermediaries, potentially offering greater transparency, lower fees, and broader access to financial tools. This approach represents a significant departure from conventional financial institutions.
Context ∞ The concept of decentralized digital banking is a central theme in the evolution of decentralized finance (DeFi), frequently appearing in news related to new protocols and financial innovations. While offering potential benefits like financial inclusion and censorship resistance, it also presents regulatory complexities and risks associated with smart contract vulnerabilities. Debates often surround consumer protection, systemic stability, and the integration of these novel systems with existing financial frameworks.
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