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What is the mechanism of DeFi | A Detail About DeFi Dapps

Now we all are knowing DeFi world very well, thanks to @steemitblog for this competition of learning and finding. Today I found a simple procedure of recreating the financial system using decentralized finance, I will try with easy and best words usage.

Process Of Recreating The Financial System:

Stable Currency:

First we will need a form of money, and when it comes to money as a store of value I still only like Steem. But let's say we want to create the financial system, so we need a stable currency just like US dollar. It is fairly stable, specially compared to emerging market currencies.

Savings Account:

You need checking and savings accounts, savings account is where you put your money and you earn interest income or at least you used to until the central bank penalized everyone by lowering interest rates, basically to zero.

Nasdaq Stock Exchange:

Then you have various exchanges, you have stock exchanges like NYSE (New York Stock Exchange), Nasdaq. You have options exchanges, your future exchanges etc.

So these are three main things we need. Each of these things has been replaced or can be replaced, in this decentralized finance. Ecosystem in this DeFi ecosystem by three different protocols, now bitcoin is a protocol, Ethereum is protocol and these are what are called DeFi protocols. When you hear protocols you should just think of a software program or code that runs. These are fairly decentralized protocols as well and something like "Uniswap" for example, is almost completely decentralized. Let's just go with these three major protocols.

MAKERDAO:

It is a protocol that allows you to create a stable coin that's called a DAI. One DAI is basically pegged to US dollar, it can fluctuate a penny or so away or maybe a couple of pennies away. You need something like this simply because Bitcoin and Ethereum are fairly volatile at this point. In fact they are extremely volatile and this is a very safe way of making a stable coin. MAKERDAO company would correspond to "Stable Currency" _{in the first heading.} Here is the website of https://makerdao.com/en/ .

Compound:

The savings accounts would be compound finance or compound. This is an interest rate protocol that lets you borrow money, but it also lets you earn interest. Just like a traditional savings accounts. Compound would be equivalent of a savings account in DeFi. Here is the website of https://compound.finance/ .

Uniswap:

The equivalent of Stock Exchange even though it doesn't trade stocks, would be a protocol called Uniswap. Uniswap is rather than being a centralized exchange, like the nasdaq it is decentralized exchange at DEX. Here is the website of https://uniswap.org/ .

Money Legos:

These are different legos, MAKERDAO is a money logo, COMPOUND is a money lego and UNISWAP is a money lego. You can combine these different protocols/legos to build your own new creation. As soon I will know better about this I will share with you. You can combine these protocols for amazing results.

Thank you all for reading. I will try to share something more interesting next time, inshallah.
@abdt!
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