Blockchain technology supports decentralized finance (DeFi) by enabling secure, transparent, and efficient financial transactions without the need for intermediaries such as banks or financial institutions. DeFi leverages the decentralized and immutable nature of blockchain to create a more open and accessible financial system.

Key to DeFi are smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. These contracts automatically enforce and execute transactions when predefined conditions are met, reducing the need for middlemen and lowering transaction costs. Ethereum is a popular blockchain for DeFi applications due to its robust smart contract capabilities.

Blockchain’s transparency ensures that all transactions are publicly verifiable and immutable, which increases trust and reduces fraud. Users can participate in financial activities like lending, borrowing, trading, and earning interest through decentralized applications (dApps) built on blockchain platforms. These dApps operate 24/7, offering greater accessibility and inclusivity compared to traditional finance.

Additionally, blockchain enables tokenization, where real-world assets can be represented as digital tokens on the blockchain. This facilitates fractional ownership, increases liquidity, and broadens access to investment opportunities. By removing intermediaries and leveraging blockchain's security, DeFi promotes a more inclusive and democratized financial ecosystem.

Blockchain technology underpins decentralized finance (DeFi) by providing a transparent, secure, and immutable ledger that supports peer-to-peer financial transactions without intermediaries. Key features of blockchain, such as decentralization, smart contracts, and tokenization, facilitate the core functions of DeFi.

Decentralization ensures that no single entity controls the financial ecosystem, reducing risks associated with centralized control and enhancing security. Smart contracts, self-executing contracts with terms directly written into code, automate and enforce agreements, enabling trustless transactions and reducing the need for intermediaries. Tokenization allows assets to be represented digitally on the blockchain, increasing liquidity and accessibility.

Furthermore, blockchain's transparency and immutability provide a high level of trust and security, essential for financial applications. Collectively, these elements enable DeFi to offer innovative financial services like lending, borrowing, trading, and investing, democratizing access to financial markets.