What is the difference between DeFi and blockchain?

DeFi, decentralized finance, is a financial system based on blockchain technology that aims to create financial services that do not require intermediaries (such as banks and brokerage companies). Blockchain is a decentralized distributed ledger technology (DLT) used to record transactions and data. When many beginners enter the currency market, it is difficult to understand what is the difference between DeFi and blockchain? According to the analysis of existing data, the differences between DeFi and blockchain are in terms of nature, function and purpose, scope and application, and technical implementation. Next, the editor will tell you in detail.

What is the difference between DeFi and blockchain?

DeFi and blockchain are different in terms of nature, function and purpose, scope and application, and technical implementation. Blockchain is a decentralized data storage and transaction recording technology that is widely used in various fields. DeFi is a specific application of blockchain technology that focuses on providing decentralized financial services through smart contracts. The following is a specific analysis:

1. Essentially different. Blockchain is an underlying technology and an infrastructure that supports decentralized applications.

DeFi is a specific application of blockchain technology, focusing on decentralized financial services.

2. Functions and purposes

Blockchain provides decentralized data storage and transaction records, and is suitable for a variety of industries and purposes.

DeFi implements decentralized financial services through smart contracts, specific to the financial industry.

3. Scope and Application

Blockchain is widely used in many fields such as cryptocurrency, supply chain management, identity verification, and the Internet of Things.

DeFi is mainly used in the financial field, including lending, trading, payment, insurance, etc.

4. Technical implementation

Blockchain includes consensus mechanisms (such as PoW, PoS), encryption algorithms, distributed ledgers, etc.

DeFi is built on the blockchain and uses smart contracts to automatically execute financial agreements.

Which blockchain does DeFi project mainly run on?

DeFi is a product that runs on public chains (such as Ethereum, Binance Smart Chain, Aptos, OKC, Polygon, etc.). These products have tamper-proof operating logic, which is often referred to as tamper-proof smart contracts. . Because public chains such as Ethereum are composed of thousands of nodes, each node maintains the same network status records and codes. All its transactions and status need to reach consensus. No single node can change the history and status of transactions at will, nor can it change the contract code at will.

Running financial products on the public chain means that it cannot be tampered with. At the same time, it is permissionless and everyone can participate. This is why DeFi is part of open finance. Finally, it is composable and can be built, connected, and combined based on these financial products, which leads to the creation of various innovations, which is why terms like DeFi Lego often appear.

However, judging from current practice, due to the high gas fees on Ethereum and technical barriers such as managing wallets, it is almost impossible to obtain good returns from small-amount mining. From this perspective, the current DeFi liquidity mining cannot be regarded as inclusive finance or truly open finance, because it has relatively high financial and technical thresholds. This is something that subsequent public chains and DeFi products running on them need to continue to iteratively upgrade to solve.

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