What does the DeFi ecosystem consist of? What elements does the DeFi system contain?

Oct 13,2022
What does the DeFi ecosystem consist of? What elements does the DeFi system contain?

What are the key elements of the DeFi ecosystem? Open ledger agreements, stable currencies, exchanges and open markets, as well as insurance and investment management platforms are all in the DeFi system. But if you want to say the best DeFi project in common applications, MakerDAO is a good example. The following article gives us an in-depth look at the components in the DeFi ecosystem to see how it can produce many useful applications.

1、 Open Ledger Agreement

Due to the characteristics of open source, open ledger agreements have gained a prominent position in the DeFi field. The popularity of DeFi projects such as Compound Finance, DAI or Dharma means the efficiency of open ledger agreements. These platforms reflect the functions of real banks, allowing users to deposit assets used for borrowing and lending in the system.

The flexibility of the DeFi login platform provides a strong support for achieving better return on investment, while also allowing better control over investment and return. It is also a beneficial aspect to support smart contracts in the automation of lending activities of the DeFi project. For example, smart contracts help connect lenders and borrowers, interest management, and loan term documents.

In addition, you can also have transparency and the right to cancel central institutions to ensure higher returns and better understanding of investment risks. It is a good choice to start with an open ledger agreement to understand how public blockchains such as DeFi and Ethereum help standardize agreements and achieve global recognition. Therefore, you can find many advantages of public blockchains like Ethereum through the open ledger agreement.

For example, the mortgage of digital assets and the integration of digital asset lending. In addition, the benefits of standardization, interoperability and automation are also obvious. In addition, transaction settlement can be carried out faster and in real time through secure lending methods. When using the open ledger protocol to access financial services, the limited requirements for KYC or credit check also have a reliable advantage.

2、 Stable currency

Stable currencies are a powerful component for understanding the DeFi ecosystem, because they are compared according to the value of real monetary assets. In general, all stable currencies in the existing DeFi ecosystem are linked to the US dollar. The main objective is to ensure better performance, trust and stability.

The design of stable currency to maintain stability is also a highlight of DeFi ecosystem compared with cryptocurrency. Stable currencies fall into three different categories: unsecured, unsecured, and crypto secured. They have different characteristics and functions. The legal mortgage stable currency is linked to real currencies such as the US dollar or the euro, so as to better ensure stability.

The ratio is the same as that of legal tender, which ensures that a stable currency has better stability and non volatility. The generally accepted legal mortgage stable currency refers to Gemini Dollars, tethers, USDC, etc. In the case of centralization, the currency mortgaged by legal tender also has certain risks. In addition, appropriate regulations need to be formulated to maintain the public's stable currency. Crypto secured stable currency is similar to legal secured stable currency. Using cryptocurrency instead of fiat currency, the main factors that promote the stability of crypto mortgage-backed securities include utility incentives and no trust insurance.

The stable currency of crypto guarantee depends on guarantee, only when the stable currency slides into debt. Crypto security stabilizes currency volatility by making the agreement a lender. The last type of stable currency is non mortgage stable currency. The outstanding feature of non collateralized stable currency is the basic algorithm to promote the development of additional tokens. It works when it is necessary to ensure that the value of tokens is reduced and stability is maintained.

3、 Decentralized trading platform

Decentralized exchange or DEX platform is an important supplement to decentralized finance and DeFi ecosystem. IDEX is a prominent example of decentralized switching. These platforms provide users with better accessibility through partial identity disclosure. In addition, decentralized exchanges do not need to store digital assets. The user should connect the wallet to the exchange and wait for execution. After transaction initialization, smart contracts can ensure proper management of fund transfer.

4、 Insurance investment management platform

The DeFi ecosystem also provides good opportunities for better investment and insurance platforms. The securities token market plays a crucial role in accelerating insurance activities. For example, Polymath is one of the best DeFi projects. It provides better tools, frameworks and resources for creating, managing and publishing security tokens. Many other asset management platforms can also help better manage transactions and risk management.


What is the DeFi ecosystem composed of? The answer to this question. In addition, DeFi's potential aims to shift attention to a more transparent financial economy. In the so-called new open financial economy, financial agreements will rely on three main elements: interoperability, programmability and ease of combination. Decentralized finance is the architect and leader of the open finance movement.