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DeFi Lego

Decentralized finance (DeFi) is an ecosystem of applications based on blockchain technology. They allow users to interact and execute transactions without the intervention of banks or other financial institutions. The entire process, including signing a binding contract (smart contract), can be performed remotely, using a smartphone or computer.

 

DeFi vs. traditional finance

Unlike the traditional finance world, which has various, independent branches that serve specific purposes, the DeFi world can be compared to Lego blocks. The “branches” of the DeFi economy all stack together and are able to talk to each other via the application layer of a given blockchain network. DeFi reduces barriers to cooperation between institutions and makes communication cheaper and less complex.

Compositional DeFi allows the communication of many protocols and projects, thanks to which developers are able to create various logical structures and a complex economy using a common base layer of the blockchain and the use of smart contracts on the top of it. This is much more robust than the current structure of contracts, which can involve many hard-to-interpret or poorly prepared contracts written with paper and pen, lawyers, notaries, etc.


What are smart contracts?

Smart contracts are the next step in the development of blockchain technology. They involve the transition from a traditional protocol of financial transactions to a universal tool that will automatically enforce contract terms. This sort of contract minimizes the risk of error or manipulation. Contracts rendered in this way are simple, quickly executed, and can update any relevant data in real time. Moreover, they exclude the need for intermediaries and various types of central institutions through which they might traditionally have to pass.

Smart contracts solve the most important problem that arises when making a transaction — the issue of trust between parties, as well as between the parties and intermediaries. They work automatically, are convenient to use, and ensure that the operation is properly performed.

You can easily use them to confirm transactions in various ways. For example, you can create a transaction that will be executed automatically if it is not canceled in an allotted period of time. These kinds of automations make smart contracts more convenient than traditional contracts, where it is necessary to use the services of a third party that ensures the proper execution of a contract. Although this third party is neutral, they theoretically could be biased and their decisions would have to be honored nonetheless. It is also not uncommon for any of the parties to introduce delays into the execution of a contract for a plethora of reasons. Smart contracts completely eliminate these problems. A smart contract cannot inherently be biased or cause unexpected delays.

In the case of the Ethereum blockchain, the use of a smart contract is not free but is paid for by a so-called 'Gas', a small amount of Ether contributed by one or more of the parties involved in a smart contract. Most often, it is a fee so low that in a broader perspective, the use of smart contracts in an enterprise may be way cheaper than traditional means e.g. by reducing internal administrative costs related to bureaucracy.


In DeFi, what are tokens?

Tokens, on the other hand, are similar to poker chips: they are easily exchangeable and can represent the ownership of just about anything. In the DeFi world, tokens can be used for transactions in various networks. Tokens can be created in unrestricted amounts using smart contracts. There can be many types of tokens on one blockchain. Tokens can be created by institutions in order to enable investors which work with cryptocurrencies to interact with the products of these institutions. Tokens are also used e.g. by artists and auction houses with tangible or intangible works of art.


Mysa’s role in the DeFi ecosystem

Mysa will become one of the blocks of the entire Ethereum ecosystem, creating its own economy and an open system to which any decentralized application (DApp) on the Ethereum network can connect and invest in real estate.

Openness and ease of access are key aspects of a decentralized application, as they give external platforms the ability to quickly integrate into the Mysa economy.

An example would be an investment fund that has decided to invest in real estate. They could do so via purchasing Mysa Tokens. The fund's application would be able to seamlessly connect to the Mysa platform and purchase or sell tokens based on any parameters they set.

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