Before you go, check out these stories!

Hackernoon logoUnderstanding The 5 Macro Areas of Decentralized Finance (DeFi) by@alfredodecandia

Understanding The 5 Macro Areas of Decentralized Finance (DeFi)

Author profile picture

@alfredodecandiaAlfredo de Candia

Author of "Mastering EOS" & "Mastering DeFi" blockchain specialist, android developer

DeFi or decentralized finance, is often used improperly or there is a tendency to believe that behind this word there is a certain project that follows certain parameters such as decentralization and dealing with finance.

Unfortunately, that meaning is misleading and completely wrong, because behind the word DeFi there is a truly vast sector not only of protocols but also sub-sectors that deal with a specific issue relating to finance.

In fact, just because a protocol is decentralized does not mean that this has to do with DeFi, on the contrary we often find ourselves in products that have only a few points with DeFi and that provide a limited view of the entire sector.

If I asked each of you what traditional finance is, you would surely answer me with several examples such as loans, insurance, investment funds, payment systems and even more complex instruments such as derivatives and options.

Just as there are these small sectors that deal with specific issues, so we find these categories, completely specular, in the field of decentralized finance, and this means that a DeFi tool must have in common its counterpart in the traditional world, otherwise it will not we can define it in this sector, it will be something different but not DeFi.

Obviously, it would be dispersive to list all the protocols that exist or the sub-sectors, and that is why we can group all the DeFi into macro categories, which within them are the various protocols that offer that type of service and financial instrument.

Another aspect that should not be underestimated and not to be confused is that of the association of DeFi with the Ethereum blockchain, because DeFi is not the same as ETH, and therefore these tools are found on several other blockchains such as EOS and Tron, with a greater or lesser presence of protocols relating to this sector.

We said that DeFi is usually grouped into macro categories, and these are 5 (even if some prefer to make a different distinction than this list) that is:

- Lending and borrowing;

- Payments;

- Decentralized Exchanges (DEX);

- Management of digital assets, therefore also of smart portfolios;

- Derivatives and all resulting instruments such as options

As can be seen from the diagram, which is not exhaustive of all the DeFi we know because as mentioned there are sub-categories in which we can find other categories (for example the various aggregators of multiple protocols will go into asset management), we can already frame by sums lines those that are the main sectors of DeFi.

Let's not forget that there are other solutions and protocols that are not widely diffused and evolved to ensure that they fall into a specific category, for example as regards the insurance sector, even if there are protocols already active in this sense, but they operate in a different way and on the smart contract side and not as in the traditional world and therefore for the moment it is still early to create and make a category in itself.

But what are the protocols that fall within the various sectors of DeFi?

Unfortunately, the protocols that we find for each sector are many and not all perform the same functions or can interact with all the tokens, but there is a a book that explains the various topics in detail then I reccomend to read one of the most important books about decentralized finance (DeFi), which takes the name of "Mastering DeFi - A practical guide for beginners and the advanced", important because it not only explains the basics of this sector and the various steps of the various protocols, over 30, but it is also the only one that examines 3 different blockchains such as Ethereum (ETH), EOS and Tron (TRX).

book that analyzes the macro-categories of decentralized finance which are:

  • Lending and Borrowing
  • Payments
  • Decentralized Exchange
  • Asset management
  • Derivatives

All organized into 8 chapters and also divided by blockchain so as to have a complete picture of what we find on the various blockchains and also make the relative comparisons to leave maximum freedom for anyone to use the blockchain they prefer without closing the door to others.

Over 30 protocols analyzed in detail and details, with relative fundamental steps, an indication of the various costs incurred to carry out the various transactions, so as to make the reader aware before he can interact with him.

Translated into 8 different languagesItalianEnglishGermanFrenchSpanishPortuguese,
, and Japanese, so as not to exclude anyone from this revolution that is underway and will continue in the years to come.


Join Hacker Noon

Create your free account to unlock your custom reading experience.