The DeFi Stack - Layers overview and served purpose

in LeoFinance2 months ago

The DeFi Stack brings together all the DeFi instruments layered one over the other and is one piece of information that each cryptocurrency enthusiast, investor or interested reader should know about it. It gives us all the apps from the DeFi space and one could see with a corner of an eye where he can put its money and do wise investments. In the same time it offers the information for anyone to participate and mediate such actions.

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The DeFi Stack is compound of multiple layers and each of one has its purpose.

  • Level 1: Atomic Units of Value
    It takes money to make money and this says it all. This layer contains all the needed tokens in the DeFi space like DAI, ETH, money market tokens (cTokens and aTokens), centrally custodied ERC-20s, pegged assets and stablecoins (USDT, USDC, WBTC, renBTC, tBTC).
  • Level 2: The Transaction Layer
    This ensures all transactional operations with the atomic units of value and their need is explained by the complex DeFi systems. The simplified purpose is to enable users to commit transactions on the chains, while optimizing throughput, gas costs, latency or other transport variable.
  • Level 3: Price Oracles
    This ensures the market data with all the prices and the demand and supply associated to that. Critical layer with the focus on security and verifiable inputs as this holds the market value for all parties involved in any transaction.
  • Level 4: DeFi Primitives
    This is the place where we encounter the yield farmers or pure play Defi applications based on different finance purposes. Following protocols are part of this layer where define the primitives of each instrument:
    Lending protocols - Compound, Aave, Cream, bZx, Yield, Notional, Mainframe
    AMM trading pools - Curve, Uniswap, Balancer, Bancor, mStable, BlackHoleSwap, DODO, Serum Swap
    Order book exchanges - 0x, IDEX, Loopring, DeversiFi, Serum
    Derivatives networks - MCDEX, Perpetual Protocol, DerivaDEX, Potion, Opyn, Synthetix, dYdX, Pods, Primitive, BarnBridge
    Asset management platforms - Set, Melon, dHEDGE
  • Level 5: Protocol Aggregators
    This takes care of all the primitive aggregators and provide smart contracts constructions that enable users to perform the actual actions on the DeFi. Some samples in this regard are the following.
    Supply-side aggregators: Yearn Finance, RAY, Idle Finance, APY.Finance, Harvest Finance, Rari Capital
    Demand-side aggregators: 1inch, DEX.ag, Matcha, Paraswap
    Aggregator of aggregators: yAxis
    Novel aggregators: Swivel Finance, Benchmark

    Level 6: Wallets and Front Ends
    This is the ultimate later on DeFi and allows to perform the operations over it and allow the end user interact with the DeFi through specific interfaces.
    Relayers: Tokenlon, Dharma, PoolTogether, Guesser
    Wallets: Coin98, MetaMask, Math, imToken, Bitpie, Exodus, Trust Wallet
    DeFi-Native Front ends: DeFi Saver, Zerion, Zapper, Argent, Instadapp

The DeFi Stack presents all the layers involved in this space for anyone to understand all that it implies when getting involved in this space. There isn't one application do it all, but usually you need to involved different tools in order to complete the operations when getting into DeFi. This is just an overview and probably based on the DeFi primitives that are considered by anyone there are specific ways to transact those through the available smart contracts. This is just an overview of all the DeFi Stack layers, while someone should read in detail and see how all glue themselves together.

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Wow...so many tools, and this is just the beginning....I wonder how this space will look like in 5years time, a convolution of DeFi tools, an all in one syndicate? Craaazy!

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Thank you for the overview! Bookmarked it to have it handy. :)

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