DeFi takes advantage of various technologies developed in the blockchain sphere. All have applications outside of DeFi, but play essential roles within the DeFi ecosystem.
- Blockchains: Distributed ledgers serving as the settlement layer for transactions. Currently, most DeFi services operate on the Ethereum network, due to its capabilities and developer adoption.5DeFi activity is growing on and across other blockchains as well.
- Digital Assets: Tokens representing value that can be traded or transferred within a blockchain network. Bitcoin and other cryptocurrencies were the first blockchain-based digital assets. Others have a range of intended functions beyond payments.
- Wallets: Software interfaces for users to manage assets stored on a blockchain. With a non-custodial wallet, the user has exclusive control of funds through their private keys. With custodial wallets, private keys are managed by a service provider.
- Smart Contracts: Blockchain-based software code that carries out, controls, and documents relevant events and actions according to predefined terms and rules.
- Decentralized Applications (Dapps): Software applications built out of smart contracts, often integrated with user-facing interfaces using traditional web technology.
- Governance Systems: Software-based mechanisms that manage changes to smart contracts or other blockchain protocols, often based on tokens that allocate voting rights to stakeholders.
- Decentralized Autonomous Organizations (DAOs): Entities whose rules are defined and enforced in the form of smart contracts.
- Stablecoins: Digital assets whose values are pegged to a fiat currency, a basket of fiat currencies or other stable-value assets.
- Oracles: Data feeds that allow information from sources off the blockchain, such as the current price of a stock or a fiat currency, to be integrated into DeFi services.
* Produced by the Wharton Blockchain and Digital Asset Project, in collaboration with the World Economic Forum