dido:public:ra:1.2_views:2_tech_views:defilayers
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dido:public:ra:1.2_views:2_tech_views:defilayers [2021/05/24 18:47] nick |
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| [[dido:public:ra:1.2_views:2_tech_views|return to Technical Views]] | [[dido:public:ra:1.2_views:2_tech_views|return to Technical Views]] | ||
| - | The [[dido:public:ra:xapend:xapend.a_glossary:d:defi]] have defined layers 0 through 3. | + | The [[dido:public:ra:xapend:xapend.a_glossary:d:defi]] have defined layers 0 through 3(( |
| - | + | Rakesh Sharma, | |
| + | Investopedia, | ||
| + | 24 March 2021, | ||
| + | __Decentralized Finance (DeFi) Definition__, | ||
| + | Accessed 24 May 2021, | ||
| + | [[https://www.investopedia.com/decentralized-finance-defi-5113835]] | ||
| + | )) | ||
| <figure DeFiLayers> | <figure DeFiLayers> | ||
| Line 11: | Line 16: | ||
| </figure> | </figure> | ||
| - | * **Settlement Layer:** The settlement layer is also referred to as Layer 0 because it is the base layer upon which other DeFi transactions are built. It consists of a public blockchain and its native digital currency or cryptocurrency. Transactions occurring on DeFi apps are settled using this currency, which may or may not be traded in public markets. One example of the settlement layer is Ethereum and its native token ether (ETH), which is traded at crypto exchanges. The settlement layer can also have tokenized versions of assets, such as the U.S. dollar, or tokens that are digital representations of real-world assets. For example, a real estate token might represent ownership of a parcel of land. | + | Sharma defines the four layers as: |
| - | * **Protocol Layer:** Software protocols are standards and rules written to govern specific tasks or activities. In parallel with real-world institutions, this would be a set of principles and rules that all participants in a given industry have agreed to follow as a prerequisite to operating in the industry. DeFi protocols are interoperable, meaning they can be used by multiple entities at the same time to build a service or an app. The protocol layer provides liquidity to the DeFi ecosystem. One example of a DeFi protocol is Synthetix, a derivatives trading protocol on Ethereum. It is used to create synthetic versions of real-world assets. | + | |
| - | * **Application Layer:** As the name indicates, the application layer is where consumer-facing applications reside. These applications abstract underlying protocols into simple consumer-focused services. Most common applications in the cryptocurrency ecosystem, such as decentralized cryptocurrency exchanges and lending services, reside on this layer. | + | * **[[dido:public:ra:xapend:xapend.a_glossary:s:settlement_layer | Settlement Layer]]** is also referred to as Layer 0 because it is the base layer upon which other DeFi transactions are built. It consists of a public [[dido:public:ra:xapend:xapend.a_glossary:b:blockchain|blockchain]] and its native digital currency or [[dido:public:ra:xapend:xapend.a_glossary:c:cryptocurrency|cryptocurrency]]. Transactions occurring on DeFi apps are settled using this currency, which may or may not be traded in public markets. One example of the settlement layer is [[dido:public:ra:xapend:xapend.a_glossary:e:ethereum|Ethereum]] and its native token [[dido:public:ra:xapend:xapend.a_glossary:e:ether|ether (ETH)]], which is traded at crypto exchanges. The settlement layer can also have tokenized versions of assets, such as the U.S. dollar, or [[dido:public:ra:xapend:xapend.a_glossary:t:tokens|tokens]] that are digital representations of real-world assets. For example, a real estate token might represent ownership of a parcel of land. |
| - | * **Aggregation Layer:** The aggregation layer consists of aggregators who connect various applications from the previous layer to provide a service to investors. For example, they might enable the seamless transfer of money between different financial instruments to maximize returns. In a physical setup, such trading actions would entail considerable paperwork and coordination. But a technology-based framework should smoothen the investing rails, allowing traders to switch between different services quickly. Lending and borrowing is an example of a service that exists on the aggregation layer. Banking services and crypto wallets are other examples. | + | * **[[dido:public:ra:xapend:xapend.a_glossary:p:protocol_layer]]** are the standards and rules written to govern specific tasks or activities. In parallel with real-world institutions, this would be a set of principles and rules that all participants in a given industry have agreed to follow as a prerequisite to operating in the industry. DeFi protocols are interoperable, meaning they can be used by multiple entities at the same time to build a service or an app. The protocol layer provides [[dido:public:ra:xapend:xapend.a_glossary:l:liquidity]] to the DeFi ecosystem. One example of a DeFi protocol is Synthetix, a derivatives trading protocol on Ethereum. It is used to create synthetic versions of real-world assets. |
| + | * **[[dido:public:ra:xapend:xapend.a_glossary:a:applayer]]**, as the name indicates, is where consumer-facing applications reside. These applications abstract underlying protocols into simple consumer-focused services. Most common applications in the cryptocurrency ecosystem, such as decentralized cryptocurrency exchanges and lending services, reside in this layer. | ||
| + | * ** [[dido:public:ra:xapend:xapend.a_glossary:a:aggregation_layer]]**, is the aggregation layer where aggregators connect various applications from the previous layer in order to provide a service to investors. For example, they might enable the seamless transfer of money between different financial instruments to maximize returns. In a physical setup, such trading actions would entail considerable paperwork and coordination. But a technology-based framework should smooth out the investing rails, allowing traders to [[dido:public:ra:xapend:xapend.a_glossary:s:switch|switch]] between different services quickly. Lending and borrowing is an example of a service that exists in the aggregation layer. Banking services and crypto wallets are other examples. | ||
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dido/public/ra/1.2_views/2_tech_views/defilayers.1621896472.txt.gz · Last modified: 2021/05/24 18:47 by nick
