{"id":666,"date":"2021-11-13T04:58:25","date_gmt":"2021-11-13T04:58:25","guid":{"rendered":"https:\/\/MrRealFi.com\/?p=666"},"modified":"2021-11-13T04:58:25","modified_gmt":"2021-11-13T04:58:25","slug":"4-components-of-defi","status":"publish","type":"post","link":"https:\/\/MrRealFi.com\/4-components-of-defi\/","title":{"rendered":"What Are The 4 Key Components of DeFi?"},"content":{"rendered":"\n<p>Comprehending the four key components of <a href=\"https:\/\/mrrealfi.com\/what-is-defi\/\">DeFi<\/a> is the most important step in understanding its features and advantages. <\/p>\n\n\n\n<p><a href=\"https:\/\/mrrealfi.com\/what-are-smart-contracts\/\">Smart contracts<\/a> provide the basis for developing DeFi applications, also known as <a href=\"https:\/\/mrrealfi.com\/what-are-dapps\/\">dApps<\/a>. <\/p>\n\n\n\n<p><strong>A DeFi platform&#8217;s components are key elements of DeFi. Each component serves a unique purpose in developing the entire ecosystem. <\/strong><\/p>\n\n\n\n<p>The four key layers are: <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_17 counter-hierarchy ez-toc-grey\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class=\"ez-toc-list ez-toc-list-level-1\"><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/MrRealFi.com\/4-components-of-defi\/#1_Settlement_Layer\" title=\"1. Settlement Layer\">1. Settlement Layer<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/MrRealFi.com\/4-components-of-defi\/#2_Protocols_Layer\" title=\"2. Protocols Layer\">2. Protocols Layer<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/MrRealFi.com\/4-components-of-defi\/#3_Application_Layer\" title=\"3. Application Layer\">3. Application Layer<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/MrRealFi.com\/4-components-of-defi\/#4_Aggregation_Layer\" title=\"4. Aggregation Layer\">4. Aggregation Layer<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/MrRealFi.com\/4-components-of-defi\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Settlement_Layer\"><\/span>1. Settlement Layer<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The settlement is the most noteworthy DeFi component because it is the foundation for the remaining 3 components. <\/p>\n\n\n\n<p>This layer features a public blockchain together with the native digital currency. The native currency is used in most dApps activities which may or may not be exchanged in other marketplaces. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Protocols_Layer\"><\/span>2. Protocols Layer<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Network protocols are a set of rules that are designed to regulate certain actions such as sending, receiving, and formatting data. <\/p>\n\n\n\n<p>The protocol layer contains regulations that every user must follow in a certain industry. <\/p>\n\n\n\n<p>DeFi protocols provide interoperability which allows many entities to collaborate and network with each other to create better services for the end-users. <\/p>\n\n\n\n<p>In a DeFi ecosystem, the protocol layer is essential for achieving the necessary liquidity levels. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Application_Layer\"><\/span>3. Application Layer<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The application layer is the key layer of DeFi where user-facing programs are stored. <\/p>\n\n\n\n<p>As basic user-oriented services, the dApps abstractly reflect the underlying protocols.<\/p>\n\n\n\n<p>The application layer is home to the most well-known cryptocurrency apps, including loan services (such as <a href=\"https:\/\/aave.com\">Aave<\/a>) and decentralized exchanges (DEXes such as <a href=\"https:\/\/uniswap.org\">Uniswap<\/a> and <a href=\"https:\/\/pancakeswap.finance\">PancakeSwap<\/a>). <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4_Aggregation_Layer\"><\/span>4. Aggregation Layer<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The aggregation is the final layer and the most crucial layer in the DeFi technology stack.  <\/p>\n\n\n\n<p>Aggregators integrate diverse apps from the previous layers to provide service to users in the aggregate layer. <\/p>\n\n\n\n<p>Aggregators can smoothen the transfer of funds between different financial instruments, thereby increasing returns for the users. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>To learn more about DeFi, read: <\/p>\n\n\n\n<ul><li><strong><a href=\"https:\/\/mrrealfi.com\/what-is-defi\/\">What is DeFi? (Simplified)<\/a><\/strong><\/li><li><a href=\"https:\/\/mrrealfi.com\/what-are-dapps\/\"><strong>What are dApps? (Simplified)<\/strong><\/a><\/li><li><strong><a href=\"https:\/\/mrrealfi.com\/what-are-smart-contracts\/\">What are Smart Contracts? (Simplified)<\/a><\/strong><\/li><li><strong><a href=\"https:\/\/mrrealfi.com\/what-are-flash-loans\/\">What are Flash Loans? (Simplified)<\/a><\/strong><\/li><li><strong><a href=\"https:\/\/mrrealfi.com\/flash-loan-attacks\/\">What are Flash Loan Attacks? (Simplified)<\/a><\/strong><\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Comprehending the four key components of DeFi is the most important step in understanding its features and advantages. Smart contracts provide the basis for developing DeFi applications, also known as dApps. A DeFi platform&#8217;s components are key elements of DeFi. Each component serves a unique purpose in developing the entire ecosystem. The four key layers [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":""},"categories":[7],"tags":[],"_links":{"self":[{"href":"https:\/\/MrRealFi.com\/wp-json\/wp\/v2\/posts\/666"}],"collection":[{"href":"https:\/\/MrRealFi.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/MrRealFi.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/MrRealFi.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/MrRealFi.com\/wp-json\/wp\/v2\/comments?post=666"}],"version-history":[{"count":2,"href":"https:\/\/MrRealFi.com\/wp-json\/wp\/v2\/posts\/666\/revisions"}],"predecessor-version":[{"id":676,"href":"https:\/\/MrRealFi.com\/wp-json\/wp\/v2\/posts\/666\/revisions\/676"}],"wp:attachment":[{"href":"https:\/\/MrRealFi.com\/wp-json\/wp\/v2\/media?parent=666"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/MrRealFi.com\/wp-json\/wp\/v2\/categories?post=666"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/MrRealFi.com\/wp-json\/wp\/v2\/tags?post=666"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}