What Is the Specific Risk of “Counterparty Risk” That Dapps Aim to Minimize?

Counterparty risk is the risk that the other party in a financial transaction will fail to fulfill their contractual obligations. In traditional finance, this can happen if a bank or broker defaults.

DApps minimize this by using smart contracts, which automatically enforce the terms of the agreement. The assets are locked in the contract, not held by an intermediary.