Blockchain: Is it a hype or a hoax?  15

• Programmability: DeFi uses smart contracts (one of the core features

of Ethereum) to provide an automated smart contract for various use

cases across the financial ecosystem. It provides a highly program-

mable smart contract to automate execution and enable the creation

of new financial instruments and digital assets.

• Immutability: It uses the immutability feature of blockchain to tam-

per-proof, immutable audit and transparency across decentralised

architecture to increase security and auditability.

• Interoperability: It provides a common software stack and stan-

dard whereby dApps applications can integrate and complement

one another. DeFi developers have the flexibility to build on top of

existing protocols, customise interfaces and integrate third-party

applications.

• Transparency: It uses the core feature of public blockchains like

Ethereum whereby anyone can see the audit of all transactions.

• Permissionless: DeFi is defined by its open and permissionless access.

Anyone with a crypto wallet and internet connection globally can

access DeFi applications.

• Self-custody: DeFi market participants keep custody of their crypto

assets and have control of their personal data. It cuts the various inter-

mediatory and bureaucracy.

Some of the main features of DeFi are as follows:

• The operation of these use cases built through dApps is not controlled

by a single institution or its employees; instead, it is controlled by

smart contracts and automation with multiple business rules.

• Code is transparent on the blockchain for anyone to audit.

• dApps are global from the start; however, local regulations may apply

to them.

• They are decentralised and permissionless where anyone can create

and use them. Users interact directly with the smart contracts from

their crypto wallets.

• dApps provide a flexible user experience where anyone can change the

user interface or use a third-party interface.

• dApps are interoperable, whereby anyone can combine other DeFi

products, e.g. stablecoins, decentralised exchanges and prediction

markets, to form entirely new products.

Most popular types of DeFi applications

• Decentralised exchanges (DEXs): These are online exchanges where

users can exchange crypto with other cryptocurrency or crypto with

Fiat currencies. For example, US dollars for Bitcoin or Ethereum for

Bitcoin. In DEX exchanges, users can directly trade cryptocurrencies

with one another without a need for any intermediaries.