Web3 vs. DeFi is a hot topic in the crypto world, but what exactly is the difference between the two? Web3 is a technology platform allowing users to interact easily with smart contracts and decentralized applications (dApps). It comprises a decentralized database, a decentralized application platform, and a decentralized file system.
DeFi, or “decentralized finance,” is a movement trying to build financial applications on top of Ethereum’s blockchain. The target of DeFi is to create a public financing system and make it accessible to everyone. How we interact with the Internet and the web is changing drastically, and we are heading toward a new era of the Internet. This new era is known as Web3, and it’s powered by a technology called a blockchain.
The rise of decentralized finance (DeFi) makes Web3 more exciting. DeFi is a new way of managing money and assets without the need for central authorities like banks or governments.
What is Web3, and What is DeFi?
The Internet has brought about many changes in how we interact and communicate with each other. How we make transactions and do our other finances has been untouched till now.
DeFi and Web3 are the two technologies revolutionizing how we interact with the digital world. Web3 allows its users to interact with the web in a decentralized way.
Further, with the help of Web3, users can control their data and information. You no longer have to rely on centralized entities like banks or governments to store your data—you can now do it yourself! This means that your data and information will be more secure, and you can control who can access them.
Web 3: Infrastructure
The Web3 infrastructure supports the next generation of the Internet. This platform is decentralized, allowing its users to interact with the world without the help of intermediaries. This will provide a more secure and efficient way of doing business on the Internet. Web3 will also help reduce the costs associated with online transactions.
The same Internet we have been using for many years will be changed forever. The world is shifting toward Web 3.0, and it will change how we use the Internet. In this article, we are going to discuss Web 3.0.
Web 3.0 is built on a decentralized network of computers that any one organization or government does not control. This makes the Internet safer for its users and more resilient to attacks.
Web 3.0’s decentralized nature will also enable new applications that were not possible before, such as decentralized exchanges and social networks.
Web 3.0 is still in its early stages of development, but the experts know its potential is high. This new infrastructure has the potential to radically transform the way we use the Internet and open up a whole world of new possibilities.
DeFi: The Applications
Decentralized finance, or DeFi, is an umbrella term for the growing world of financial applications built on Ethereum. DeFi offers many services, from lending and borrowing platforms to stablecoins and tokenized BTC. DeFi also offers a wide range of services missing among traditional centralized institutions.
For new users in DeFi, there are a few key applications to know about. MakerDAO is a decentralized lending platform that allows users to collateralize their Ether and generate Dai, a stablecoin pegged to the US dollar. The compound is a popular lending platform that allows users to earn interest on cryptocurrency items.
Uniswap is a decentralized exchange that allows the swapping of ERC-20 tokens without the help of an intermediary. Kyber Network is another popular DEX with similar features.
DeFi and Web3 Common Features Explained
There are differences between DeFi and Web3, including some common points as well. Although blockchain and Web3 differ from decentralized finance or DeFi, they still have many common features.
Open and Permissionless
The Web3 and DeFi Crypto projects are designed to be open, fair, and permissionless. Unauthorized means users do not require authorization from a central entity to use the network. An open and public blockchain system (which “Web3” is thought to stand for) works so that everyone can participate. This feature allows users to access their crypto wallets and additional network-specific infrastructure with just a few clicks from their laptops and smartphones.
In the context of blockchain, “decentralization” means “the network operates independently without the involvement of a centralized agent.” This is typically demonstrated by the globally distributed network of network nodes.
Interoperability means the ability of many blockchain networks and their DeFi platform to share data, technology, and tokenized digital assets.
Non-custodial directly means any bank does not hold the user’s funds. Instead of relying on a centralized system, users can take advantage of numerous financial instruments (lending, borrowing, staking, etc.) on their terms. Without bank custody or authorization, users can withdraw their funds anytime.
Programmability is the ability of software developers to design network infrastructures that can perform a nearly unlimited number of use-case-specific iterations. This is typically accomplished through smart contracts, which enable users to perform specific tasks in real-time without needing an intermediary. These tasks consist of enforcing specific contractual agreements, exchanging value and data, and using various on-chain mechanisms.
Token-based Economic and Governance Systems
DeFi and Web3 use an economic system and governance structure based mainly on tokenization and decentralization of assets. Some blockchains and DeFi-platforms are built on Proof of Stake (PoS) infrastructure, allowing network participants to influence how these systems perform in the long run.
It enables users to buy, sell, or trade digital assets that are perfectly divisible by fractions and significantly lowers the barriers to entry for users when compared to traditional approaches.
Future: Where Does Web3 End and DeFi Begin?
We are in the early stages of a new internet era that is decentralized, more open, but also secure. This is the vision of Web3, and it is being realized through the power of blockchain technology and decentralization.
The rise of DeFi is one of the most exciting things about this era. DeFi is a movement building an infrastructure for a new financial system powered by blockchain technology. This new system promises to be more open, transparent, and accessible than the traditional financial system.
So where does Web3 end and DeFi begin? Web3 is the underlying infrastructure that enables DeFi to exist. Without Web3, there would be no decentralized exchanges, synthetic assets, or decentralized lending platforms.
Overlap Between Web3 and DeFi
There are a lot of differences between DeFi and Web3. Still, one thing they have in common is that the rise of DeFi and Web3 protocols presents a unique opportunity to build a more decentralized and accessible financial system. By combining the strengths of both technologies, we can create a financial system that is more resilient to censorship and corruption.
The protocols of Web3 provide the base for a new decentralized internet where the users control and handle their data and applications. DeFi protocols build on this foundation to provide decentralized financial services accessible to anyone with an internet connection.
By working together, Web3 and DeFi protocols can create a powerful ecosystem that gives users more control over their financial lives.
In conclusion, there is a big difference between Web3 and DeFi. While Web3 is about decentralization and giving users more control, DeFi focuses on financial applications. However, both Web3 and DeFi can potentially change how we interact with the Internet and provide us with various opportunities. It will be interesting to see how these two technologies develop in the future and what new applications they will bring.