Definition ∞ A DeFi mechanism is a specific operational process or protocol within decentralized finance that enables a particular financial function. These mechanisms allow for peer-to-peer lending, trading, or yield generation without centralized control. They are typically executed via smart contracts on a blockchain.
Context ∞ The efficacy and security of various DeFi mechanisms are under constant scrutiny, particularly concerning smart contract vulnerabilities and economic exploits. Debates often address the sustainability of high yields and the systemic risks posed by highly interconnected protocols. Continued innovation focuses on developing more robust and audited mechanisms to enhance user trust and protocol resilience.
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