DeFi and Tokens

Decentralised Finance (DeFi) is a financial ecosystem built on blockchain that aims to recreate and improve upon traditional financial services — lending, borrowing, trading, insurance — without intermediaries. Tokens are the building blocks of DeFi.

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What is DeFi?

DeFi replaces traditional financial intermediaries (banks, brokers, exchanges) with smart contracts:

Traditional Finance	DeFi Equivalent	Example
Bank savings account	Lending protocol	Aave, Compound
Stock exchange	Decentralised exchange (DEX)	Uniswap, SushiSwap
Loan officer	Collateralised lending	MakerDAO
Insurance company	Decentralised insurance	Nexus Mutual
Asset manager	Yield aggregator	Yearn Finance
Derivatives exchange	Decentralised derivatives	dYdX, GMX

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Token Standards

Ethereum token standards define how tokens behave and interact with wallets and protocols.

ERC-20: Fungible Tokens

ERC-20 is the standard for fungible (interchangeable) tokens:

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.20;

import "@openzeppelin/contracts/token/ERC20/ERC20.sol";

contract MyToken is ERC20 {
    constructor() ERC20("MyToken", "MTK") {
        _mint(msg.sender, 1000000 * 10 ** decimals());
    }
}

Core ERC-20 Functions