Web3 uses blockchain technology to create a more equitable Internet. The original vision of the Internet was that it would be decentralized and accessible to all, but unfortunately, that vision has been lost, as the web has become increasingly centralized. DeFi is essentially the Web3 version of a more transparent financial system.
without permission
The term “permissionless” is used because there are no restrictions on who can participate in these networks. Those who participate may do so without any limits or barriers.
The difference between DeFi and Web3 lies in their implementation and how developers use them. DeFi is primarily built on blockchain and is used to enable financial services without a central authority.
Web3 is a broad term that includes DeFi and other decentralized technologies, such as DApps, non-fungible tokens (NFTs) and DAOs.
decentralized
Decentralization refers to the ability to act without being controlled by a centralized intermediary. Both DeFi and Web3 are designed to be decentralized. Web3 is an attempt to build a decentralized, open network free of centralization using peer-to-peer protocols. Similarly, DeFi uses blockchain technology to conduct transactions without relying on centralized institutions such as banks.
inter-operable
The term “blockchain interoperability” describes how well different blockchains can communicate. This allows them to freely exchange data, tokenized assets, and other technology.
In a centralized world, it provides easy access to one’s data across multiple applications through centrally stored data. DeFi services living in a shared blockchain network are interoperable with each other.
custody
In terms of custodial control, DeFi applications are typically non-custodial, meaning users hold the private keys to their funds and assets, giving them complete control and ownership.
Conversely, depending on the specific application, Web3 applications can also be non-custodial, but some can also be custodial, where a third party holds the private keys and controls the assets.
cryptographically verifiable
The DeFi Chain and Web3 blockchain systems are designed to be impervious to tampering, with records on the chain verified through cryptography. Not only does this help make the system more transparent and secure, but it also makes it impossible to falsify any record on the blockchain.
Economic and Governance System
DeFi and Web3 both use asset tokenization and decentralized governance mechanisms for their economies. By using proof-of-stake (PoS) technology, many blockchain and DeFi platforms give users a voice in the platforms’ future development.
Digital assets are fractional, divisible and available for purchase in amounts as small as $1. This has increased the interest of new users who previously had no prior interest in trading due to perceived high barriers to entry.
The summary of DeFi vs Web3 is listed in the table below:
