🤔What is DeFi World
Last updated
Last updated
To clarify the various components of a leading DeFi platform, it's important to distinguish between its different aspects, which can often be confusing for newcomers.
DeFi World Labs: This is the organization responsible for developing both the DeFi World protocol and its web interface.
DeFi World Protocol: This refers to a collection of persistent, non-upgradable smart contracts that collectively form an automated market maker. This protocol enables peer-to-peer market making and the swapping of ERC-20 tokens on the Polygon blockchain.
DeFi World Interface: This is a user-friendly web interface designed to facilitate easy interaction with the DeFi World protocol. It's important to note that this interface is just one of many ways users can interact with the protocol.
DeFi World Governance: This is the governance system in place for overseeing the DeFi World Protocol, empowered by the DeFi World token.
Introduction: The DeFi World protocol is a peer-to-peer system tailored for the exchange of cryptocurrencies (specifically ERC-20 Tokens) on the Polygon Blockchain. It is implemented as a set of persistent, non-upgradable smart contracts. The design focuses on censorship resistance, security, self-custody, and operates without the need for trusted intermediaries who might restrict access.
Automated Market Maker (AMM) vs. Order Book: Traditional markets typically operate on a central limit order book model, where buyers and sellers place orders sorted by price levels, which are filled as market demand fluctuates. This is a familiar system for anyone who has traded stocks through brokerage firms.
In contrast, the DeFi World protocol employs an Automated Market Maker (AMM), or Constant Function Market Maker, instead of an order book. In simple terms, an AMM uses a liquidity pool containing two assets, with their value relative to each other. Trading one asset for another alters their relative prices, thereby establishing a new market rate. This means that traders interact directly with the pool, rather than with specific orders from other users. The pros and cons of AMMs compared to traditional order book systems are the subject of ongoing research and discussion.
Permissionless Systems: Another key difference is the permissionless and immutable nature of the DeFi World protocol. Inspired by the core principles of the Polygon network, this design is rooted in the commitment to permissionless access and immutability as essential elements for a future where financial services are accessible to all, without discrimination or counterparty risk.
Being permissionless means that the protocol's services are open to the public, without restrictions on who can use them. Anyone can swap tokens, provide liquidity, or create new markets. This is a significant shift from traditional financial services, which often have access barriers based on location, wealth, or age.
The protocol's immutability implies that it is non-upgradable. No entity can pause the contracts, reverse trades, or alter the protocol's behavior. It's important to note that DeFi World Governance has the authority to redirect a portion of swap fees from any pool to a specific address. To prevent misuse, this percentage is limited to a range, known in advance to all participants.
