  Decentralized Finance (DeFi) refers to financial services that are not
necessarily related to crypto-currencies. By employing blockchain for security
and integrity, DeFi creates new possibilities that attract retail and
institution users, including central banks. Given its novel applications and
sophisticated designs, the distinction between DeFi services and understanding
the risk involved is often complex. This work systematically presents the major
categories of DeFi protocols that cover over 90\% of total value locked (TVL)
in DeFi. It establishes a structured methodology to differentiate between DeFi
protocols based on their design and architecture. Every DeFi protocol is
classified into one of three groups: liquidity pools, pegged and synthetic
tokens, and aggregator protocols, followed by risk analysis. In particular, we
classify stablecoins, liquid staking tokens, and bridged (wrapped) assets as
pegged tokens resembling similar risks. The full risk exposure of DeFi users is
derived not only from the DeFi protocol design but also from how it is used and
with which tokens.
