Web3 Finance: Wallets, Tokens, Smart Contracts, and DeFi
Summary
This overview introduces four Web3 building blocks: digital wallets, tokens, smart contracts, and blockchain networks. It distinguishes internet-connected software wallets from hardware storage, explains the difference between blockchain-native coins and tokens issued on an existing chain, and describes how smart contracts execute predefined rules. It also presents blockchain as a shared ledger that enables transactions without a central intermediary.
The article connects these components to decentralized finance, describing DeFi as open-access, interoperable, programmable, and resilient, and outlines fiat-backed, crypto-collateralized, and algorithmic stablecoins. Examples include dollar-linked assets and collateralized borrowing. The material is an introductory explanation, not a trading or investment method; claims about security, decentralization, and inclusion are broad, and the article does not analyze protocol failure, custody risks, or stablecoin depegging in depth.
Key ideas
- Wallets give users control over access to blockchain assets, with different tradeoffs between online convenience and offline storage.
- Coins are native to their own blockchains, while tokens operate on an existing network.
- Smart contracts execute actions when their encoded conditions are met and recorded on a blockchain.
- DeFi protocols use blockchain infrastructure to provide financial services without relying on conventional intermediaries.
- Stablecoins may rely on fiat reserves, crypto collateral, or algorithmic mechanisms to target price stability.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.