Introduction

In the world of cryptocurrencies, the terms DeFi and DEX are heard everywhere. They are often used as synonyms, but this is a gross mistake. Understanding the difference is not just theory. It is the key to a conscious and profitable journey through the realms of the decentralized internet. Let's set everything in order.

A simple analogy

Imagine a whole financial district of the city — with banks, pawn shops, insurance companies, and stock exchanges. This is DeFi (Decentralized Finance) — a huge ecosystem of decentralized finance.

Now take a look at one of the exchanges in this area. This DEX (Decentralized Exchange) is just one of the elements of the infrastructure, albeit one of the most important.


What is DeFi ? (Financial district)

DeFi is a vast ecosystem of financial services operating on the blockchain without intermediaries. Its goal is to replace traditional banks, lending institutions, and insurance companies.

What is included in DeFi:

*Lending and borrowing** (Aave, Compound): You can lend your assets for interest or take a loan by collateralizing cryptocurrency.

*Staking and yield farming** (Lido, Yearn Finance): You can 'freeze' your assets to maintain network operations or provide them to liquidity pools, earning rewards.

*Stablecoins** (DAI, USDC): Cryptocurrencies whose price is pegged to fiat currencies like the dollar.

*Insurance** (Nexus Mutual): Services to protect against hacks and failures in smart contracts.

*And finally, DEX:** Decentralized exchanges are part of this ecosystem specifically responsible for trading.

Key feature of DeFi: Your money is always under your control in your wallet. You do not transfer it to a third party.

What is DEX? (Specific exchange)

DEX is not the entire ecosystem, but its trading artery. It is a platform that allows you to directly exchange one asset for another using smart contracts and liquidity pools.

How it works:

*No registration and KYC:** You connect your wallet (e.g., MetaMask) and start trading.

*Liquidity Pools:** Instead of an order book, like on centralized exchanges (CEX), trading occurs against pools — smart contracts where other users have placed their funds to earn a percentage from fees.

*Examples:** Uniswap, PancakeSwap, 1inch Aggregator.

Key feature of DEX: Direct 'wallet-to-wallet' transactions and the ability to trade thousands of assets, including the newest tokens not available on major exchanges.

Main differences:

DeFi criterion
(The entire ecosystem) DEX

(Marketplace)
Essence A whole decentralized financial system A tool for exchanging assets within this system

What can be done Trade, take loans, lend, insure, earn interest

Only trade and exchange assets

Scale
A wide range of services and protocols
A narrowly specialized service

Analogy
The entire financial district of the city
One specific stock exchange in this area

Why is it important to know in practice?

1. Understanding risks: When talking about 'DeFi-risks', you may imply the vulnerability of the credit protocol. When referring to 'DEX-risks', you usually mean impermanent losses in a liquidity pool or scam tokens.

2. Finding opportunities: A new groundbreaking lending protocol (part of DeFi) may generate a frenzy of demand for its token. And this demand will be reflected in the price you see on DEX.

3. Efficient usage: You do not go to DEX to take a loan secured by ETH. For that, you use the lending protocol Aave (part of DeFi). And the funds you receive can be converted on the same DEX.

Conclusion:

DEX is a powerful tool, but just one in your arsenal. DeFi is the entire arsenal. The ability to use them together is a sign of an advanced participant in the crypto market.

Ready to apply your knowledge in practice?

Evaluate the dynamics of key DeFi tokens right now:

[UNI/USDT]· [AAVE/USDT] · [COMP/USDT]

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