UNIC - An Intro to DeFi by Prof George Giaglis

hello welcome this is week 12 the final session of the university of nicos introductory course to digital currency i am geor and the topic today is decentralized finance or defi so what we will be doing is try to provide a framework for understanding decentralized finance and place it into the context of things we have been discussing uh in the previous sections of of this course we will be explaining the main features and components of dy and where appropriate we are going to be comparing them to those of what we will be calling trad fi for

traditional finance and introduce some of these components in more detail so this is our agenda we will start by providing a definition of defi the main focus will be to explain the defi technology stacks so the types of architectures and components that collectively make up what we call decentralized finance and then we will focus on some application areas namely stable coins decentralized learning landing and borrowing applications and decentralized exchanges let's start with the definition as i will as i said we will be using the term trad to refer to the traditional financial services industry like

banking credit all the types of companies and and segments of the industry that make up the the traditional financial services industry and what is common for all these components is that there are centralized institutions that act as intermediaries as we have discussed also in the past so sometimes people are using the term c centralized finance to refer the traditional financial services industry so all types of financial services providers commercial banks investment banks central banks asset managers all all the industry belongs to to this umbrella term and trad is based on two main pillars one is

what we call custodial approach trust our assets entities for for custody for safekeeping and for management and permission nature so in order to be able to open an account at a bank or another financial institution you need to pass some vetting procedure and only those that are authorized verified or approved by the bank will are able to participate in the financial system even when you are inside the financial system the types of activities and transactions that you can do is also determined by the prevailing rules regulations and it is at the discretion of of your

financial services provider to to approve or disprove any type of transaction that you wanna be involved in and this system the traditional finance industry has has worked for many years and this architecture has ara a driver economic growth for centuries however with the the advent of blockchain and other decentralized technologies we now have the opportunity to address some of the shortcomings of of traditional finance and among them are the fact that a large percentage of the global population remains un banked because they do not have access or they cannot get approvals to to to open

or use bank accounts there are sometimes ridiculously high costs and artificially low speeds involved when performing transactions through trad fi sometimes the whole system has been accused of politici the idea of money through things like money printing that central banks sometimes engage in capital controls or manipulating currency and others and there is a rampant lank of transparency everything happens behind closed doors in in this system the system has been accused for enabling information asymmetries where some people have privileged access to information and some others do not and all this gives rise to to risks that

we have seen playing out a lot in the past few years globally including financial crisis and and bank runs so maybe some of those things can be addressed by technology and this is where defi comes into play so defi can be thought of as a collection of decentralized open source and peer tope financial services and products that utilize smart contracts and are based on blockchain technology uh in order to minimize dependency on third party even though decentralization the biggest let's say innovation that is that defi is bringing into the financial services industry as we have

discussed a couple of weeks ago in this course it is sometimes impossible to eliminate dependency on trusted third parties why we we sometimes is trying to minimize dependency on third parties but in reality what it might do in some cases at least for the majority of users that are not able to directly interact with smart contracts is to replace existing intermediaries with with other intermediaries and thereby you know falling short of of the theoretical promises that it would bring at least at least in theory i have to say that def is distinct from fintech fintech

another term you might hear a lot in the financial services industry when it comes to innovation in finance fintech is a more generic term that refers to all types of innovations that are afforded by technology in finance defy is a more specific term that refers to financial activities that that are blockchain based and are trying to dis intermediate the the existing financial services industry def is effectively providing the type of services traditional banking offering like for example lending or borrowing trading and exchanges and things like that however without the need of the conventional intermediaries that

we have nowadays in the financial system however might go be words it doesn't only mirror existing functions trad but can also enable new types of services that were simply not possible in in trf remember a couple of weeks ago that we have been discussing how in the beginning when a new technological paradigm emerges we tend to to mimic what the old system was doing so we bring the same types of services in the new paradigm but over time new types of services native to the new technology that were not possible before emerge and this is

the case with with defi as well so some of the characteristics that defi has are shared with the characteristics of blockchain technology that we have been discussing in this course so open permission l and censorship resistant so nobody can block anyone from participating in the system or block valid transaction depending on rules protocol and application transactions on a to basis directly between the trans parties without intermediaries the intermediary here is usually smart contract so mediated by by code sorry the validation of transactions also happens at the network level so without any trusted third party having

the role of validator the whole system is much more transparent in the sense that all transactions are happening on public blockchains so even though they are anonymous or pseudonym they are still publicly accessible and verifiable nobody can can refute that that something has happened if it is written on the blockchain and the reason for that obviously is that records on a blockchain are immutable finally the whole d system is global as is blockchain technology there is no geographical limitations or you know state bs to determine which types of transactions can can happen and these characteristics

are not necessarily good sometimes you will want to block certain people or countries that are under sanctions for example from participating in some transactions this is that is not natively supported in def applications that are global in in nature let's let's move to the to the core of the of the discussion which is about what we call the def stack so the architecture of the decentralized finance system and this this diagram from from this paper here is is what we are going to be basing our discussion in so this diagram starting from from the bottom

and top defines def applications as modular applications that happen at different layers abstraction we have the settlement layer the asset layer the protocol layer the application layer and the aggregation layer and we will go through each of them in detail let's start with the settlement layer which is where transactions are ultimately and this is effectively the blockchain the underlying blockchain everything ultimately happens and the transactions are ultimately settled we call the settlement layer because it's the foundation of all activities in a decentralized ecosystem we call it the first layer in the in the system and

why you might hear many blockchains to be referred to as layer one or l1 blockchains what it consists of are two things so the blockchain where things happen most of the defi activities nowadays happen on ethereum but this is slowly changing so it could be any blockchain that supports smart contracts as well the native token of that blockchain so if we are talking about the ethereum blockchain the native token is part of the settlement layer because this is the token that is used to pay for transaction fees for all the transactions that are happening so

the settlement layer is used to store information it ensures that any changes in status like for example a change of balance or ownership of specific asset follows the rules of the underlying blockchain and enables trust execution through smart contracts the second layer is the asset layer and you might notice here that depending on the application the native asset of the blockchain can be thought of as belonging both to the settlement layer and to the asset layer in the sense that the native asset ether for example can be used both to pay for transaction fees and

sle transactions in a d application but it could also be the underlying asset in which these transactions refer to but in most cases uh oops sorry in most cases e would be the settlement layer asset and there will be other types of tokens that belong to the um to the asset layer most of them fungible so if we are talking about ethereum they follow the erc20 standard that we have seen earlier in this course some non most common case in the for so for nfts we follow different standards like erc 721 or 1155 on the

ethereum blockchain so the asset layer refers of all to all the assets that are issued on top of the settlement layer both the native asset and other tokens and as said tokens are follow specific standards that depend on the underlying blockchain so if we talking about ethereum these standards are erc20 rc 721 if we are talking about solana this might be the spl standard or for the binance smart chain the b20 standard and so on and so forth these tokens as we already explained serve different functions so the native token e in the case of

ethereum or avax in the case of avance or sold in the case of solana they they are fueling all the applications that build on top of the blockchain and the tokens that are needed to pay for the fees for all transactions that are happening the non native tokens are more important in the case of d because they are used in app as will later on and serve functions some of them might utility tokens others might be governance tokens others might be stable coins and so on and so forth we have discussed different types of tokens

earlier in this course as well here is a slide that summ some of the standards that are either existing or under development on the eum blockchain not the most important things to remember the ones that are by far the most widely used as we already explained is erc20 so fungible tokens tokens in which every token has the same value of everything else of every other token in the same in the token and erc 721 for non tokens inle toisa different value others interested all all the standards linkd layer in st is protocol layer happening because

up to now settlement and asset layer we are talking about blockchains and about tokens so we don't have applications yet the first type of defi application happens at the protocol layer where you do whatever functionality you decide to do and as i said the functionality can be really anything it could be exchanges so swapping between tokens lending and borrowing derivative financial product asset management anything el is about mim extending the applications of the existing financial services industry so you can build any type of protocol here the common denominator of all the things that belong to

the protocol layer is that they are essentially smart contracts in the case of of def so the protocol layer is the heart of the centralized applications we call applications ds for the centralized applications and this is where smart contracts live this is where the backbone of of tabs exists one thing that people sometimes confuse is they confuse this layer the protocol layer with the next one the application layer and this is because most of the users will typically engage with dy applications through some tye of website like a web to interface but in reality these

interfaces are not the defy applications themselves they are just interfaces to these applications the real dy functionality happens at the protocol layer and happens as a smart contact so if you are an advanced user you can access uniswap or or any other type of dfi application by interacting directly with the smart contract obviously for the majority of of people this is not possible for technical reasons so they will engage with applications through a web interface so the protocol layer is about the the the smart contracts and the types of functionalities that we can have at

this layer is literally unlimited anyone can be build any type of application that they want on a permission architecture the next layer is where most users engage with defi and this is the application layer um uh it is designed for those users that will not directly engage with the the smart contracts that live on the layer below and effectively it it provides a user friendly interface that makes defy accessible to to a broader uh audience again i've said this in the previous slide but i cannot stress this enough although these web front ends are critical

for accessing dfi they are not the dfi applications themselves so you run a risk when you access a decentralized defi application through a centralized website because the website might be hacked and direct you to do things that are not what you you would like to do and this is a risk that you taking when when you mixing web two and web 3 applications but for the time being this is i guess sort of necessary for most of the users finally we have we have another layer that it is not always easy to distinguish between the

application and the aggregation layer so the borders between these two layers are are a bit porous and it's called an aggregation layer because the idea here is that we try to enhance user experience by aggregating different applications together and providing a single point of entry for for users so a classic example of an aggregator in the case of decentralized exchanges for example is one inch that is a a decentralized exchange that allows you to access multiple underlying decentralized exchanges through a single web interface other examples are are dbank or year finance in the in the

case of yield farming for example okay let's move into this this this is the architecture that consists of five layers but let's let's discuss before we move into the types of applications a very important underlying element of of all this which is stable coins stable coins as the as the name suggests they try to address the volatility that exists in crypto tokens by trying to to maintain a stable price against some sort of reference some sort of target this target can be anything so you can create a stable coin that follows the price of you

know an ounce of gold but in most cases is is the usd or some other major fiat currency so most of the stable coins that people use today they are try to to peg themselves to always be worth one us dollar stable coins are very important in the in the defy system because they allow users to to interact with financial applications without ever leaving the the decentralized space imagine if every time that you wanted to let say not be exposed to the underlying volatility of a crypto token you would have to convert your holdings into

some fiat currency and enter the realm of the trad if you wanted to stay in def you would need to have some sort of token that still is decentralized lives in blockchain and has all the all the characteristics of tokens but the time value is ped to fiat type of currency so the idea of stable coins is that they try to introduce a blockchain native unit of account and medium of exchange at the same time referring to the traditional financial services industry the way that that stable coin and ex cani depends main two things one

is what is the mechanism that they use to remain stable how can we ensure that the price of te for example would always be 1 very close to and second how decentralized are they because if you have i mean the ideal stable coin would have a very secure mechanism that ensures that it remains stable at all times and is 100% decentralized at the same time it is usually not possible to achieve both of these today at least to to the full extent so we need to make some compromises so in some cases we sacrifice stability

for the sake of decentralization in other cases we might sacrifice decentralization for the case of stability and you know it depends on on on your preferences and the the types of applications that you interested in which of these characteristics are more important for you but in theory we have let's say three main categories of stability mechanisms so some tokens are using on chain collateral so in other sense they utilize crypto assets as lateral to back the value of token and if using crypto assets obviously the biggest benefit is that decentralization is high but because of

the underlying volatility capital efficiency might not be as good in other sense you would need to over collateral your currency in order maintain stability against p in the ofs coins are trying some stable coins are trying to do this to secure stability through off chain collateral in other words you have your stable coin but it is not backed by crypto it's backed by traditional finance real world assets it could be fiat currency commodities whatever this is more stable and capital efficient so if i issue you know 1 million george stable coins and i have verifi

1 million dollars in the bank and these coins are always exchanged for a dollar on one to one basis then obviously the value of the of my stable coin will always be 1 because if if for whatever reason the value falls below 1 arbiters would come in they would buy my token at say 95 cents because they they will have a a guaranteed profit because they would always be able to redeem it for 1 so it's it's a better way to maintain stability in terms of capital efficiency but obviously it beats the purpose of full

decentralization because if you are going to back your tokens through some off chain asset then as we discussed last week there would always need to be some intermediary and you know some would say where def if this is a if this is dependent on intermediaries a third approach that been that has been tried in the past few years i have to say with not much success up to now is to try to maintain stability through some sort of algorithmic design of the token in other words try to do away with without or with little collateral

either on chain or off chain collateral this obviously has a very high degree of decentralization but because the algorithm might be difficult to design in a way that it may maintains the peg at all cases uh it it might be less stable and we have seen some cases of spectacular collapses of stable coins that tried to follow this approach up to now related to the to the level of stability we have the level of decentralization and here we have two extremes centralized and decentralized stable coins centralized stable coins depend on external custodians so there needs

to be a centralized entity that the coin and decentralized ones can operate without such a intermediary a cas study is is te for example usdt which iss sorry which is what we would call a chain collateralized stable coin usdc for example by circle is another example of this tether aims to maintain in one one peg with with a dollar using a reserve system so in theory for each usdt that exists in circulation the tether the company holds an equivalent one us dollar in reserve and they they promis that they would honor that one to one

peg so if you come to them with one usdt they would always exchange it for one the bank account since usdt is backed by such an chain collateral this this this is an off chain collateralized system so it relies on an intermediary an example of a non chain collateralized stable coin would be die which is backed by initially it it was backed only by ether nowadays it's backed by other cryptocurrencies as well it is managed by a by maker dow decentralized autonomous organization that overseas the insurance and governance of the die stable coin and the

idea here is that you use crypto as collateral so that you have a more decentralized system the problem here is but if you want to mint let's say min to create let's say 100 worth of die which should be 100 die since they are pack to the dollar one to one and you would need to collateral it with ether you would need to deposit and lock up a higher than 100 amount of ether let's say 50 wor of ether and the reason is that if you deposited exactly 100 worth of ether today and you mined

batal value e below current price 5 minutes later then suddenly your die would be under collateralized so need you would need to do what we call over collateral to ensure stability the system when you have on chain collateralized stable coins will demand more collateral value amount of circulation and alat acts as a safety net against price fluctuations of the underlying collateral also leads to capital ineffable coin finally algorithmic stable coins we have two main mechanism try to maintain the peg one is what we call the rebase model which directly alters the supply of stable coins

so the idea here is look at this example for example let's say let let's say that we me a stable coin and we say this stable coin is pegged one to one the dollar and let's say that the value of the coined in the market we do nothing if for whatever reason the coin loses peg and starts trading below the dollar we interv on user wall and we decrease the supply so that the ped in other in wallet you don't know how many you will have the next because it might overnight lose its peg and

be reed and you wake up and the next day you have 95 such dollar each valued at one dollar hopefully but since you had 100 now you have 95 such dollars you effectively have less less money in total if for whatever reason price goes above the rebase mechanism will increase the supply effectively initiate inflation in the currency bring the value down to one there is also other models like the senior model that is more complicated andes regulate supply demand price of the of the asset and there might be other models are being invented in the

future what we we have seen up to now and this is an excellent article written by our very own l these algorithm stable coins haven managed prove value example of ust and luna if i mean a bit too much to explain it now in the time that we have available but if you are not familiar with the story it is a very interesting story of how us lost its peg to the dollar and it started a downward spiral that ended up to the collapse of the whole ecosystem not only us the terra usd but also

the crypto token luna of the terra ecosystem let's move to discuss a little bit the applications of some of the applications of decentralized finance we will look at two of them decentralized learning and decentralized exchanges obviously defi is a very big subject so it's not something that we can cover in in one session for those of you that are doing our masters in blockchain and digital currency we have a whole course block 529 that is on decentralized finance and there you will have a full semester to explore the the details of of defy here we

will just scratch the surface to to give you an idea of what types of applications exist there when we are talking about decentralized learning we're talking about what the banks effectively do take deposits and they l out money to investors for an interest the same thing can happen in dy but here the loans are algorithmic governed so there is a smart contract that at all times governs the types of loans that can be taken out by borrowers the interest rates and everything else based on the on the rules thee the idea is to build autonomous

financial services mim the banking syst does but through smart contracts and this system allow users to either l their exess assets or borrow digital assets for a variable or fixed interest rate depending on the on the application let try compare types of exist in compared to those that exist in traditional finance so there are differences to who can supply capital and who can take a in def anyone can do that and when i say any like we discussed last week this is not even limited to humans or corporations it could literally another smart contract that

comes and ls money borrows money from a defi application in traditional finance obviously only banks licensed financial institutions can provide loans and only those that are approved by the banks can take a loan the interest rates here are set by the central bank and by the bank here in defy they are set algorithmic as we said when it comes to the collateral that you need to put down to take a loan uh in in traditional finance you typically under collateral alone so you put up less collateral the value of a loan or in many times

like credit card loans these loans can be totally unsecured here for reasons that have to do with what we discussed earlier in the case of stable coins the loans would need to be typically over collateralized we will see the details in the next slide sorry the maturity is typically fixed in the traditional financial service industry so you take a loan for 7 years or 15 years or 30 years or whatever here you might have fixed loans but most times loans are perpetual so you you take up a loan and as long as you pay interest

you can not repay the capital the loan stops when you you return the capital the types of risks are different for the lenders if you are a bank the risk is that your customer will default or there systemic risk in the financial system here you have many more risks if you have led your money because you have risk of the platform being hacked or going down the protocol suffering some sort of problem the volatility of the of the assets turning against you there might be governance problems that change the rules of the system as as

you go along there might be scams that result in you losing your money so there all sorts of things that you should be careful about before you l your money in a def application these are obviously very new things and lots of research and du diligence is needed before you expose yourself if you are a borrower in in the in the traditional finance if you take up and you cann rep you legal consequences l collateral or the house if it's a mortgage or whatever here because nobody knows who you are remember that these things happen

anonymously the problem is that you would be suffering what we call a forced liquidation so the collateral that you put up against your loan would be liquidated if you do not repay your your loan so let let explore a little bit more this concept of collateral in in landing in trad in traditional banking lending can be under collateralized so the idea is that lenders require some reward so to give you their money rate tye of ris example credit worth of the borrower and they also demand some insurance they would need to know that the money

that they provide will be repaid and sorry and these there are all sorts of credit history checks and there might be collaterals and there is always you know legal recours that you can follow if your borrowers do not repay their loans for reasons you have access to all these mechanisms either before or after you provide a law you can get away with under collateralized or even unsecured loans in the case of of trad fy but in defy lending there is no legal recourse there is no credit history there is no no your customer processes because

all entities are anonymous so how can you can you give out loans it would be sorry know it keeps doing that so it would be reasonable to assume that if you have a system in which pseudonym entities act in a permission way and nobody can stop them borrowing in system of the collateral put for the loan at any below the value of the loan be no incentive for me to pay back this loan this is what we call moral hazard in economics right if the value of my house is less the value of my loan

better of letting the bank keep the house instead of repay the loan paying you more the market value my house to mitigate this problem which is i mean inherent in d the d loans are typically over collateralized what this means is that you can borrow but you can only borrow less money than the value of the collateral that you put down and if the value of the collateral later because the collateral will be crypto assets and for whatever reason you know the prices fluctuate and the value of the collateral falls below the outstanding value of

the loan then theater liquid meant for liquidation earlier on so it would be sold automatically by the smart contracts in the open market to repay the lender in therefore there is no moral hazard and we can do decentralized lending without credit histories or or kyc checks finally let's explore a little bit decentralized exchanges and exchanges smart contracts that mimic what centralized exchanges like stock markets for example do they facilitate swaps between tokens using smart contracts without intermediaries so trading happens on a pe tope basis there is a self custody approach where users retain control over

their funds and all the all the other types of advantages we have def like compos ability so you can have decentralized exchanges that are integrated or are interacting with other defy applications uh there there could be interoperable uh protocols or applications and you would theoretically have lower transaction costs due to the absence of intermediaries from the system uh in order to understand how decentralized exchanges work though it it is worth taking a step back and looking at how centralized exchanges uh works and for those of you that have not done any stock trading in the

past let's explore a little bit the concept of of an order book so an order book as the name suggests is a book digital book that collects the volume of all the buy and sell orders for an asset so at any given point in time there are people interesting in buying let's say apple st so they are the bidders the ones that put buy orders in and there are holders of apple stock that are interested in selling that stock these are the ask right so the order book is a ledger that collects all the buy

and sell orders for a particular asset when these prices the bids and the asks are matched then we have a transaction what is happening and this determines the current price of the stock so if there someone willing to buy apple stock at $50 and someone willing to sell at $50 a transaction occurs if the highest bidder is willing to buy at 149 and the highest asker the lowest asker the lowest seller is willing to sell for no less than 151 then there is a miss match there is a gap of two and no transaction occurs

so these order books are are effective when you have liquid market if are many people willing to buy and sell a particular financial instrument there is enough volume then the order book is a very efficient mechanism of price discovery so knowing what is the the price that the market agrees that a fair price to do in transaction and there is very little sli sli is the difference between you the expected and the actual price of trade for those of you that have transact in in very liquid tokens you would know that you know the price

that you see in in in a website and the price that you actually do the transaction is is different because there are not enough people willing to sell their token so you have to bid higher and higher until you you clear the market have a transaction and are operators called market makers in traditional finance that maintain this stream of bid and ask orders in in a book right so this is how an order book operates in traditional finance this is the bids the people that are willing to to buy so there's someone or many people

is just an aggregation of the volume that is willing to buy 2650 stocks for for 1136 and there are other people willing to buy not higher than 1135 1134 and so on so you have a descending price of beats and you have an ascending price of asks so there's someone willing to sell 450 shares at 1138 1500 shares at 1139 and so on and so forth while the order book is is like this no transaction is going to happen because the highest bidder and the low ask cann be matched if someone comes and says i

would like to buy i don't know 5000 shares at 1140 what is going to happen is that i will buy 450 at 1138 i will buy 1500 at 1139 i will buy 1105 at 1140 the difference cann be cleared because are not stocks here so i will have both i don't know 3100 stocks or something here so there would be another 2000 stocks remaining so there would be my remaining order would be here i would be willing to buy 2000 stocks at 1140 but now the this would have been taken out of the order book

the lowest ask would be at 1141 and the new price of the token will be 1140 right so this is how things work in the traditional markets but it is very difficult to build a decentralized exchange using an order book because to post orders would require transactions to happen on chain and this would cost gas face for me it doesn't cost anything to post here saying i want to buy one st 1130 do would do a transaction and this thing that might not might never execute actually would cost me money so it would be even

if it would be for me especially for a market maker or for high frequency trader it would be totally every time that you post an order or every time that you cancel an order and therefore you would result in a liquid market in which only very few people would post orders and this would result on all sort of sorts of inefficiency the market high slip l trades inefficient price discovery and so on so how do we solve this problem the the innovation in decentralized finance is the invention of what we call liquidity pools liquidity pool

is a reserve of funds that are held in a smart contract and they are one of the foundational mechanisms of defi they are used not only in decentralized exchanges but also in landing and borrowing and synthetic assets and insurance and all the other st we will in liquid pools are doing as their name suggests is that they try to ensure that there is always sufficient liquidity in the market the first decentralized platform that used lp was b bor but they were popular much later by uniswap uh today there are almost all decentralized exchanges are using

liquidity pools cve pancake sw in binance chain or balancer and so on the idea in those decentralized exchanges that are based on liquidity pools is that anyone can become a market maker you just provide liquidity for a token pair let's say that you build a market for exchanging ethereum to usdt you can become a market maker for that pair by providing liquidity by posting both if and usdt and adding them to theol of liquidity that ex anyone that comes in and wants to do a trade either exchange usdt for usdt for e or ether for

usdt they would use that liquidity pool and they would be able to make this exchange they would pay some transaction fees and transaction fees are usually depending on the protocol shared by the market makers by the liquidity providers anyone can create a pool so in other words there is no listing requirements so if you wanted to list a new token a new share in a centralized exchange you would have to go through all sorts of approvals and procedures here you can just create a liquidity pool you from token a to token b by just posting

liquidity for both tokens and you you immediately have a market for this token so what the user will see is something very simple this is like the user interface from uniswap decentralized exchange so i'm here at the application layer so this is the web interface a user connects their wallet on the ethereum blockchain and they can swap exchange ether for usdc in this example and you say you know i have this amount of e and you will receive a quote that says you will receive 2200 usdc for this at this exchange rate and this is

the amount of money that you will pay in fees and you can either accept or not accept this in order for this to work it means there is a pull somewhere that has an amount of ethers not very good at writing with this and an amount of usdt usdc sorry who has provided this capital market makers okay so there are liquidity providers that have provided these and if i come in with my 093 ether and i do this transaction this ether is going to be added to the pool the usdt is going to go out

from the pool and into my wallet and this is how it works the this amount of money is going to go i mean depends on the protocol might go to protocol itself but usually it goes to the market makers those that have put their liquidity in and they can always take their liquidity out of course so uh this is this is a a a quick introduction to the main elements and architecture of dy we saw the dy stack the settlement layer the asset layer the smart contracts the protocol layer the web applications the application layer

and the aggregation layer we discussed stable coins and we saw two main examples of defi namely decentralized learning and decentralized exchanges as always we have some additional further reading for you to to look if you wanna see more about all these things thank you very much for for being with us and looking forward to seeing you on the live session by by l