What Sets the DeFi and Web3 Apart?
The foundation for Web3’s extensive expansion was unveiled with the launch of the Ethereum blockchain and its smart contract capability in 2015. Many people think that Web3 is enabling the development of a new internet that can address the inefficiencies that still afflict Web1 and Web2. Web3 uses decentralized computer networks, distributed apps, and smart contracts through the incorporation of blockchain technology. The Ethereum network played a key role in the creation of many protocols between 2017 and 2020 that would grant access to a more open, transparent, and permissionless financial system. Although this new paradigm is not Web3 in and of itself, it has evolved in many ways into the basis for a new decentralized financial system. The approach is commonly referred to as decentralized finance (DeFi).
The appearance of Web3 and DeFi
The internet has been a part of everyday life for so long that its growth can be divided into a number of distinct stages. These stages describe the development of technology, our relationships with digital technology, and the impact those relationships have on society and the economy. The first internet version that was suitable for everyday use started to appear in the middle of the 1990s. Web1 is the name of this stage. Basic websites and internet apps that altered society and financial institutions were made possible by Web1. The dot-com boom and the progress and growth it generated were the epitome of this age.
Then came Web2, which created a more dynamic, user-focused internet that made it feasible to share data in a more effective and fair manner than was before possible. Online banking, mobile apps, Myspace, Facebook, and other aspects of this internet era continue to power a large portion of today’s internet usage. Despite this, a lot of people think the Web2 internet is faulty since it relies so much on centralized design and rent-seeking business models. Web3 has gained popularity in recent years thanks to its promises of decentralization, more fair access, and more democratic economic models. Web3 is mostly based on blockchain.
Although blockchain technology and cryptocurrency were both launched with the launch of Bitcoin in 2009, it wasn’t until the introduction of Ethereum in 2015 that a new framework was introduced that allowed for the extension of blockchain technology into anything like Web3. Decentralized networks may now carry out a variety of cutting-edge tasks related to fundraising, decentralized finance (DeFi), non-fungible tokens (NFTs), decentralized autonomous organizations (DAOs), stablecoins, the metaverse, and blockchain games thanks to Ethereum smart contracts.
DeFi has played a significant role in the expansion of the Ethereum blockchain and Web3. DeFi is a dynamic ecosystem of free and open platforms, financial goods, and financial tools that stands in for a new financial system that functions in a more transparent, unrestricted, and equal way. Although the term “Web3” refers to a broader technological and social phenomenon, DeFi can be considered a specific subset of the Web3 crypto movement.
While the foundation of Web3 is the use of blockchain technology to build a more fair internet, decentralized finance is Web3’s take on a more open financial system. DeFi is rapidly evolving into a new paradigm that permits novel types of value and utility unattainable within the conventional financial system as a result.
DeFi solutions are utilizing smart contract technology to power financial utility in a huge variety of ways, first through Ethereum and now increasingly through other Layer-1 blockchains. A DeFi crypto wallet is used by the bulk of these systems to help customers manage their money in a non-custodial fashion. Let’s examine a few of them in greater detail:
Decentralized exchanges: A decentralized exchange (DEX) is a P2P market that connects buyers and sellers of cryptocurrencies. DeFi platforms are non-custodial, in contrast to centralized exchanges (CEXs), which means a user maintains ownership over their private keys throughout transactions. DEXs use smart contracts, which self-execute in the absence of a central authority and add each transaction to the blockchain.
The three main uses of DeFi platforms are lending, borrowing, and staking in multi-purpose peer-to-peer money markets that offer a range of goods and services. Decentralized money markets enable users to lend, borrow, and stake digital assets by supplying the protocol with liquidity via various forms of collectivized liquidity pools (LPs). DeFi loan markets are still developing as new strategies for investing and deploying funds are constantly realized.
Synthetic assets: The ability to create tokenized assets on the blockchain that resemble real-world assets like stocks, bonds, commodities (such as gold and silver), fiat money, and interest rates is known as a synthetic asset.
NFTs, or non-fungible tokens, are immutable, verifiable cryptographic assets that can stand in for anything from trade cards to works of art to specialized access tickets. One of DeFi’s largest markets, NFTs have steadily increased their market share. These resources are frequently used in blockchain-based play-to-earn (P2E) systems, which reward players for their in-game activities. Additionally, it is now normal practice for NFTs to be bought, sold, and traded on NFT marketplaces for NFT cryptoart, digital art, music, and other mediums.
DeFi crypto choices are also increasingly being used for the trade, use, and storage of a wide variety of crypto assets, including stablecoins, utility and governance tokens, and liquidity provider tokens, among others. DeFi is also being used as an interoperable framework for the management, transfer, and use of central bank currencies between legacy financial infrastructure through a number of Layer-1 blockchains.
About us:
NFT Labs is a web3 company exploring big ideas in community, utility and engagement to push the crypto, NFT and metaverse space forward. To learn how your organization can participate in the web3 revolution, write to us at hello@itsmyne.club.
We’re backed by leading blockchain institutions including Longhash Ventures, Antler, Oracles Investment Group, and Shima Capital among others. NFT Labs is also the issuer of the MYNE token ($MYNE), a BEP-20 utility token for Itsmyne and partner applications. MYNE serves as the gateway between traditional social media and blockchain-based social economies.
