The DeFi (Decentralized Finance) space would not be complete without a discussion on money legos. These are the building blocks for programmable money, performed by smart contracts and executed on a blockchain. The proliferation of decentralized applications is due to the infrastructure provided by the Ethereum blockchain network. It is one large decentralized network of nodes that has a world state, that checks the consistency and finality of a transaction.Connecting these components together is the main concept of composability. In a way, it is a \u201cmiddleware\u201d that binds various protocols through an interoperability layer. In DeFi, these protocols are responsible for transferring value, swapping tokens, fetching external feeds, and providing liquidity. These consist of components that interoperate to provide solutions as financial instruments for users. Popular examples of these protocols include Curve, Yearn, Bancor, and Compound. These protocols, unlike banks and other financial institutions, are also permissionless and trustless entities. They just provide an infrastructure for users, and they cannot censor or block users from using their protocol.Ethereum As A PlatformDeFi\u2019s base layer is the Ethereum blockchain network. Ethereum provides an operating system layer that supports DApps (Decentralized Applications) are used in DeFi. It began early on with decentralized exchanges (DEX), and now it also provides a platform for AMM (Automated Market Makers). Ethereum, for the most part, is the blockchain where transaction data is immutably stored as proof or verification.Use of the Ethereum blockchain as a platform for DApps requires the use of Ethereum\u2019s native token Ether (ETH). A smaller denomination of Ether called Gwei (0.000000001 ETH) is used to pay for units of computation on the network called gas. The gas costs are part of the fees paid in order to process transactions that are validated by nodes called miners (or stakers in ETH2). Most DeFi tokens run\u2026<\/p>","protected":false},"excerpt":{"rendered":"
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