Bitcoin Cash is programmable money, this means developers can write smart contracts which are more complex than a normal sending transaction. Multi-Signature wallets are the simplest example of smart contracts but clever finance or recurring payment applications can also be written! The first DeFi product on BCH is Detoken which uses the smart contracts developed by Anyhedge. Detoken is a non-custodial platform that offers Bitcoin Cash futures contracts. Going short BCH in a BCH denominated contract is called "hedging" and is a way to stabilize the value of your BCH holdings without having to sell or convert to trusted stablecoins! Solving the volatility problem this way was the central idea behind the AnyHedge contracts. The topic is covered in depth in the video "The Dawn of Bitcoin Cash DeFi: AnyHedge and DeToken".
The promise of DeFi
"DeFi" or Decentralized Finance means financial applications without middlemen. It's a different paradigm that levels the playing field by removing barriers to entry and, because there are no middlemen, is non-custodial. The non-custodial nature of DeFi applications provides an incentive for cryptocurrency holders to withdraw from an exchange to take part in them. These finance applications increase the liquidity a cryptocurrency and can use the speculative climate of the cryptospace to offer useful hedging contracts to merchants for example. Currently the most popular DeFi applications are automated market makers, algorithmic stablecoins and borrowing & lending applications. There is a lot a room for growth, with sythetic assets on a decentralized network traditional finance products like stocks would be tradeable without the limits of legacy finance. The execution of DeFi smart contracts is trustless but outside datasources called oracles are often required to provide (price) data to the blockchain. The need to trust an oracle is the Achilles' heel in smart-contract construction and requires reliance on reputation.
Solutions like Bitcoin Hivemind introduce decentralized oracles corporations.
Advantages of BCH
Bitcoin Cash has undergone multiple hard fork upgrades which expanded its smart contract, most important of which is enabling covenants with the opcode "checkdatasig". This allows for spending restrictions on future outputs and is not possible on BTC. Basic opcode functionality previously disabled by Bitcoin Core was also reintroduced to BCH. Compared to more powerful smart contract blockchains like ETH, Bitcoin Cash has the advantage of using a UTXO model while ETH has an account based model with a global state. Put simply this means BCH scales much much better than the ETH architecture meaning it will not have the same fee problem with increased usage.
To get a better idea of the difference in smartcontract capabilities read: "Smart contracts on Ethereum, Bitcoin and Bitcoin Cash".
Bitcoin Cash also still has some big restraints on smart contracts which make the more complex applications impossible. Luckily protocol developers want to address these issues to boost application development and innovation on BCH. There'll probably be a significant smart contract upgrade May 2022. Just like on Ethereum tokens and smart contracts go hand in hand but unfortunately the current SLP tokens on BCH can't interact with smart contracts. On the Bitcoin Cash Research website proposals have been put forward to introduce miner validated tokens to BCH to facilitate interesting applications such as AMM-style DEXes.
Great blogposts by General Protocol detailling the current limitations of the BCH scripting language.