Decentralized finance aims to use technology to eliminate intermediaries between the parties in a financial transaction.The components of DeFi are stablecoins, use cases, and a software stack that enables application development.
They are secure platforms since they use cryptographic techniques to ensure that only authorized people can access them.They have high levels of decentralization, which means that there is no need for a bureaucratic chain to impose itself on top of the platform’s functions.They are transparent. Since they are built on free software, every line of code on the platforms is auditable.
Without limits or borders. Access to such a platform is borderless, so you can use this service seamlessly from anywhere in the world.DeFi apps give users more control over their money through personal wallets and merchant services that explicitly cater to individual users rather than institutions.
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What are the components of DeFi?
At a broad level, DeFi components are the same as those of today’s financial ecosystems, meaning they require stablecoins.
DeFi components take the form of stablecoins and services like crypto exchanges and lending services.Smart Contracts provide the framework for the operation of DeFi applications because they codify the terms and activities necessary for the operation of these services.
conditions of a loan between individuals. If certain terms or conditions are not met, the guarantee may be forfeited. All of this is done through a specific code instead of being done manually by a bank or other institution.
Layer 0 — This layer is so named because it is the foundation on which other DeFi transactions are built. It consists of a public blockchain and its native digital currency or cryptocurrency. Transactions that occur in DeFi applications are settled using this coin, which may or may not be traded on public markets.
An example of the settlement layer is Ethereum and its native token ether (ETH), which is traded on crypto exchanges. This layer can also have tokenized versions of assets, such as the US dollar, or tokens that are digital representations of real-world assets. For example, a real estate token could represent ownership of a parcel of land.
Software Protocol Layer: Software protocols are standards for governing specific tasks or activities. In parallel with institutions, this would be a set of principles and rules that all participants in a given industry have agreed to follow as a prerequisite for operating in the industry. An example of a DeFi protocol is Synthetix, a derivatives trading protocol on Ethereum.
Application Layer — As the name suggests, the application layer is where consumer-facing applications reside. The most common applications in the cryptocurrency ecosystem, such as decentralized cryptocurrency exchanges and lending services, reside in this layer.
Aggregation layer: The aggregation layer consists of aggregators that connect various applications from the previous layer to provide a service to investors. Loans, banking services and crypto wallets are an example of a service existing in this layer.
DeFi Examples Decentralized Finance
Today there are more and more DeFi platforms. Bitcoin and Etherum are two of the most important examples, since these two projects alone constitute 70% of the cryptocurrency capitalization. Here are some DeFi tools that make up the decentralized finance ecosystem. Do not miss it!
biscuit
Bisq is a P2P exchange protocol built especially for Bitcoin and completely decentralized.
RSK
RSK is a protocol and set of services identified as RIF OS, a complete development platform that includes smart contracts, digital identity, decentralized storage, instant payments, cross-chain bridges, integrated payment system, decentralized communications, and generation of decentralized markets. .
OX
0x is a protocol for building decentralized P2P exchanges that works on top of Ethereum.
bank
Bancor is a token exchange system built on top of Ethereum.
compound
Compound , is an investment pool protocol with lending, yield farming, and liquidity mining options that has become highly relevant during 2020 to the point of displacing MakerDAO for two weeks as the DeFi with the highest value.
Kyber
Kyber , a swap protocol for integrating swap functionality into applications with cross-chain operations.
