Decentralized Finance (DeFi) represents a shift from traditional financial systems to peer-to-peer finance enabled by blockchain technology, primarily on the Ethereum network. DeFi offers a wide array of financial services such as lending, borrowing, and trading without intermediaries, leveraging smart contracts for automation and transparency. However, the decentralized nature of DeFi introduces significant security challenges, including smart contract vulnerabilities, impermanent loss, and oracle manipulation. To address these, innovations like Layer 2 solutions, interoperability protocols, and enhanced consensus mechanisms are being developed, alongside best practices such as rigorous auditing, risk management, and user education. The future of DeFi security will likely involve predictive AI tools, regulatory frameworks, and robust community governance to ensure a safer and more reliable ecosystem.

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