Definition ∞ DeFi Economics refers to the economic principles and incentive structures that govern decentralized finance protocols and applications. This field examines how value is created, distributed, and managed within open, permissionless financial systems. It analyzes tokenomics, liquidity provision, lending mechanisms, and yield generation strategies. Understanding DeFi Economics is crucial for assessing the sustainability and risk of various decentralized financial instruments.
Context ∞ DeFi Economics is a rapidly evolving field, constantly adapting to new protocol designs and market conditions. Key discussions center on the long-term viability of current yield models, the potential for systemic risk across interconnected protocols, and the influence of regulatory actions. The ongoing innovation in this area seeks to build more robust and equitable financial systems.
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