Which Solution Is Better?

DeFi vs. dApp: Which Solution Is Better?

Two major and revolutionary innovations in the digital space leveraging blockchain technology are DeFi and dApps. These two inventions help eliminate third parties, referred to as centralization, and give asset owners control over their funds. Both solutions are swiftly becoming widespread in the financial world as they offer users data privacy. However, it is easy to confuse these two terms because they have quite similar notions. This guide will delve into dApps and DeFi and provide insight into their distinctions. 

What is Decentralized Finance?

The DeFi platform is a robust ecosystem comprising applications constructed on publicly distributed chains that facilitate permissionless financial services. DeFi is an aspiring financial project aiming to decentralize major traditional finance use cases such as insurance, wealth management, trading, and investment.

Each option is powered by a central authority like banks or other financial institutions. It achieves that by leveraging the decentralized blockchain network, particularly dApps. In turn, such traditional funds use cases or products are generally transformed into transparent protocols operating without centralized oversight. Thus, DeFi gives users more control over their funds and lowers financial risks. 

DeFi Leverages Blockchain

DeFi primarily uses a blockchain ecosystem for managing, storing, and minting crypto assets. A ledger stores virtual data within reliable, immutable, secure, and distributed networks without interference from any third party. 

The blockchain deployment in DeFi lets crypto asset holders access multiple financial instruments and services, comprising borrowing and lending assets, cross-border transfers, investing, payment, and asset management, without the central authority’s involvement. In addition, DeFi app-based contracts enhance the transparency and resiliency of the entire money-driven system.

DeFi Apps Rapid Growth

DeFi gradually gained popularity in the crypto world in 2018. An Ethereum-based ventures boom focused on building a secure, self-supporting, open financial network that helped drive the DeFi platform’s growth. Following the boost, DeFi underwent a steady uptrend. Hence, the DeFi app’s value has significantly increased in two years since it appeared. 

In line with DAppTotal, DeFi’s apps were worth over USD 1.22 billion as of Sep 12, 2019, growing from USD 180 million a year ago. The figures show that DeFi apps have boosted enormously, indicating bright prospects for DeFi development. Now, over 100 DeFi dApps are offering various finance-based services. Some popular DeFi dApps are listed below: 

DeFi Key Features

DeFi is a promising financial project that decentralizes major conventional finance use cases. Here are its main features:

  • Permissionless – DeFi-driven technology is permissionless, so anybody can generate DeFi apps or deploy the platforms without carrying out extensive registration procedures of standard banking.
  • Trustworthiness – Employees or financial institutions do not oversee decentralized finance protocols; hence, the code can be trusted. They operate on dApps and, in turn, via digital contracts. Once utilized on a blockchain network, they work without any interruption. 
  • Programmable – DeFi applications or contracts can be pre-programmed to meet users’ needs.
  • Transparent – DeFi code is typically transparent on the ledger and open to finding bugs, auditing asset transactions, and analyzing the smart contract’s functionality. 
  • Censorship Resistant – Unlike conventional banking, DeFi is censorship-resistant. That means anyone can use money-focused instruments, notwithstanding the censorship contract. 

How Does DeFi Work?

Decentralized finance deploys the blockchain-driven technology that crypto assets use. dApps are implemented to handle funds transactions and run the ledger:

  1. Transactions are recorded in blocks and verified by other users in the chain.
  2. The block is closed and encrypted if these verifiers agree on such a transaction.
  3. Another block is generated with data about the previous block.

The blocks are then “chained” together via the info in each proceeding block, building a blockchain. Records in previously generated blocks cannot be altered without affecting the subsequent blocks, so the ledger cannot be modified. This concept guarantees the secure nature of a blockchain.

Decentralized Applications (dApps)

Decentralized Applications are digital applications that run on a ledger using smart contracts. They operate both on blockchain and P2P networks. To understand the concept of dApps, review the functionality of smart contracts. A smart contract is a computer operating system or transaction protocol with a self-executing contract. Briefly, dApps are digital apps that deploy contracts to manage all ecosystem users’ activities.

dApps are almost similar to conventional sites, with the front end implementing the same technology to show pages. Yet, unlike standard sites that use API to link to a database, decentralized finance applications utilize a smart contract to interact with the ledger. Assume ledger as the Internet, decentralized apps as Facebook, and smart contracts as www.

Key Features of dApps

Decentralized apps have the following common key attributes:

  • Open Source – Decentralized Apps are governed by autonomy, which means all required changes are accepted by a consensus of the vast majority of users.
  • Decentralized – dApps are completely decentralized, meaning all asset transaction records are available on the public ledger network. 
  • Incentivized – Users have the opportunity to generate tokens after finalizing a task, for instance, to verify transactions. A standard way of incentivizing validators is via the use of cryptographic tokens.  
  • Protocol – To demonstrate proof of value, communities or users around dApps need to agree on an ideal cryptographic algorithm, such as PoS and PoW. 

Some of the top dApps available in the blockchain are

How Does a dApp Work?

DApps are generally stored and executed on a blockchain network using Ethereum commonly. The decentralized app is validated via so-called cryptographic tokens. DApps use front-end code for rendering a web page. Yet, dApp’s back-end code differs, as it operates on a peer-to-peer network. That makes dApps free from single-authority control. While centralized servers support a conventional app, a dApp is supported by a digital contract. Note that some dApps may work only on sites with custom codes.

Smart contracts apply rules set in the mediate transactions and the code. Generating a dApp on the network requires combining several contracts and using third-party intermediaries. A contract’s blockchain runs on a ledger of data records stored in blocks. The data blocks remain dispersed over distributed locations. All the blocks are linked and ruled by cryptographic validation.

Difference Between DeFi and dApps

Both DeFi and dApps are described as decentralized and have almost the same features. In contrast, two key points differ them from each other:

  1. Use cases:

The key distinction is that DeFi is grounded on dApps and is more focused on commercial use cases. However, a decentralized application is not limited to funds use cases as they may be used to develop education, gambling, gaming applications, and web browsers with enhanced privacy. 

  1. Network access:

Another major difference between the concepts is that dApps leverage digital contracts, which, once launched, necessitate a consensus to modify. dApps can operate on a P2P network of computers, unlike DeFi. The latter is fully limited to ledger networks. 

Note that qualified professional needs to be consulted before making serious financial decisions. Hence, visit trusted sources from experienced traders to learn more.


Unsurprisingly, many people in the crypto world often confuse these common terms. DeFi primarily intends to decentralize established financial services, such as cross-border transfers, decentralized exchanges, payments, investing, and asset management. Distributed exchanges do not engage in fiat-to-crypto transactions. Contrarily, dApps are broad and deliver decentralized apps leveraging ledger and smart contracts in various current-time sectors such as gambling, education, gaming, and supply chain management.  

Since the foundation of blockchain and crypto assets, several technological and financial innovations have emerged. DeFi and dApps plan to disrupt the financial industry. These two ground-breaking technologies are making good progress in eliminating central authority by implementing blockchain technology. 


What are dApp and DeFi?

Overall, not much difference is seen as both technologies operate on a decentralized system. However, two key points distinguish them: The DeFi operations are limited only to blockchain networks. In contrast, DApps run on a P2P network and utilize smart contracts to function, needing consensus for any alteration.

Is DeFi the future?

DeFi innovation creates ripe possibilities, introducing new and better ways to serve clients. Instead of taking down centralized banking, DeFi may successfully be the thing that future-proofs it.

Which platform is best for DeFi?

Here are the top DeFi platforms available in 2022: Kraken, Nexo, Youhodler, Coinbase, Defi Swap, Aqru, Binance