April 23, 2024

Components of the Defi

All the components of a decentralized financial system are linked to each other and belong to a stack, i.e. a collection of software necessary for the creation of web applications. Each has a distinct function in the realization of a Defi system and this modularity allows the combination of multiple services focused on specific needs that combine for the realization of a Defi application.

Cardano DEX Transactions taking place on decentralised applications are settled using this currency, which may or may not is traded in public markets.

Protocol layers establish the rules and parameters of the entire network to regulate specific tasks or activities. It could be considered as a prerequisite accepted by all those who decide to operate in a particular sector.

Decentralized finance protocols are interoperable, which means they can be built and composed by combining other protocols such as stablecoins, decentralized exchanges and prediction markets.

The application layer represents a layer that masks the technical details of the protocols and serves as a user interface. The main purpose of this layer is to enable optimal use and interoperability for the end-users of the services.

The aggregation layer allows Defi liquidity to expand beyond savvy cryptocurrency users. This level places ease of navigation, website consultation and visual interface first, offering a far superior experience compared to direct interaction with the liquidity level.

The decentralization of this protocol allows users to keep control of their funds at all times, as opposed to what happens in centralized exchanges where you have to give up control of your private keys to register orders on a database.

Perspectives of Defi

Decentralized finance stands as a precursor to a system free from obsolete legislation drawn up by individual financial jurisdictions, based on their respective needs. However, these “borderless” transactions of decentralized finance present various problems related to the difficulty of holding a person or legal entity responsible for any security problems, when the system is breached and digital assets are stolen or when the entire system collapses. Unlike traditional banks, which can be sanctioned or even closed permanently, no one can be held accountable when something goes wrong with Defi. This is because DApps are built on decentralized systems,

To conclude, Defi is still in the early stages of its evolution and intends to respond to the innumerable limitations of the current financial system access inequalities, counterparty risks, opacity, etc, creating the basis for a new system rather than making incremental improvements. to the existing one.