HiFi DeFi

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 In Today's world where if any person want money via loan there are various paperwork and procedures that everybody need to follow if not then you are not allow to take loan through bank. It means your every penny is with bank. and every information of that penny is with bank and that institution where you took that loan. This isn't not peer to peer transaction and it isn't transparent though. This is what centralized finance is.

To remove the role of this banks and institution DeFi comes and play its crucial role. Defi comes To Provide peer to peer transparent transaction.  

What is DeFi?

Decentralized finance (DeFi) is an emerging peer-to-peer financial system that uses blockchain and cryptocurrencies to allow people, businesses, or other entities to transact directly with each other. The key principle behind DeFi is to remove third parties like banks from the financial system, thereby reducing costs and transaction times.

Defi needs a foundation of blockchain network and cryptocurrencies and software through which people can be able to transact with each other.

How Defi should work?

Through peer-to-peer financial networks, DeFi uses security protocols, connectivity, software, and hardware advancements. This system eliminates intermediaries like banks and other financial service companies. These companies charge businesses and customers for using their services, which are necessary in the current system because it's the only way to make it work. DeFi uses blockchain technology to reduce the need for these intermediaries.

Blockchain is very essential aspect for Defi to work. On which we discuss detailed in previous blog. do consider reading that as well.

In Short blockchain means "Name itself suggests a definition of it that is the chain of blocks. then what is block, Block is the storehouse of the transaction data. Every block contains 3 elements Transaction data, Timestamp and Hashes. every block is connected with next block and formed a chain, so it called as blockchain."

To make it clearer, DEX (Decentralized exchange) and CEX (centralized exchange) works in layered form.

1. Settlement layer:- Settlement layer is also referred to as Layer 0 because it is the base layer upon which other DeFi transactions are built. It consists of a public blockchain and its native digital currency or cryptocurrency. 

2. Protocol layer: - Protocol layer are the standards and rules written to govern specific tasks or activities. In parallel with real-world institutions, this would be a set of principles and rules that all participants in a given industry have agreed to follow as a prerequisite to operating in the industry. 

3. Application layer:- Application layer provides interface to user for trading, lending and purchase. it may be wallet, web or application.

4. Aggregation layer:-  Aggregation layer where aggregators connect various applications from the previous layer in order to provide a service to investors.


Uses of Defi


1. Decentralized Exchanges (DEXs) – Trade Without Intermediaries

Peer-to-peer trading.

Liquidity pools – Earn fees by providing liquidity.


2. Lending & Borrowing – Earn Interest or Get Loans

Supply crypto → Earn yield.

Borrow against crypto (No credit checks, just collateral).

Flash loans – Instant, uncollateralized loans (for arbitrage).


3. Stablecoins – Hedge Against Volatility

Algorithmic (DAI, FRAX) or collateralized (USDC, USDT).

Spend, save, or trade without crypto price swings.


4. Yield Farming & Staking – Maximize Returns

Stake tokens to earn rewards (e.g., staking ETH for ~4-6% APR).

Yield farming – Provide liquidity for high APYs (sometimes 100%+).


5. Derivatives & Synthetic Assets – Trade Anything

Trade crypto, stocks, or commodities as synthetic assets.

Options & futures – Hedge risks.


Concerns of DeFi


Decentralized finance is constantly evolving. It is unregulated, and its ecosystem is vulnerable to faulty programming, hacks, and scams. For example, one of the main ways hackers and thieves steal cryptocurrency is through weaknesses in DeFi applications.

Laws have not yet caught up with advances in technology. Most current laws were crafted based on the idea of separate financial jurisdictions, each with its own set of laws and rules. DeFi’s borderless transaction ability presents essential questions for this type of regulation. For example:

Who is responsible for investigating a financial crime that occurs across borders, protocols, and DeFi apps?

Who would enforce the regulations?

How would they enforce them?


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