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Blockchain and DEFI

Understanding Blockchain and DEFI

The effective utilization of blockchain technology by human users remains underexplored, necessitating a deeper understanding of how individuals can achieve their goals efficiently and satisfactorily. Within the Human-Computer Interaction (HCI) community, user interface designers hold a crucial role in bridging the gap between the design and implementation of blockchain technology and its practical application.

What Is Blockchain?


Blockchain, initially devised to facilitate Bitcoin transactions, is a cryptographic technique for storing linked records across parties in a peer-to-peer network, preventing tampering. A “block” comprises confirmed transactions, a timestamp, and a hash code calculated from the block’s content and the previous block, forming a chain. Verification by involved parties, using mechanisms like Proof-of-Work, Proof of Authority (PoA), or Proof of Assignment (PoAss), is essential for adding a block to the chain.

Key Components Of Blockchain


  • Cryptography: Strong encryption ensures authorized user decryption.
  • Ledger: A shared and distributed database for storing data.
  • Consensus: Protocols preventing unauthorized modification of transactions by minor nodes.
  • Smart Contract: Rules, penalties, and actions are automatically applied to involved parties upon meeting conditions.


Main Features And Characteristics Of Blockchain


  • Decentralization: Nodes in a peer-to-peer network collaborate for processing and validating data without a central trust party.
  • Trust-less: Participants can engage without prior knowledge of each other.
  • Anonymity: Communication using generated virtual identity codes. 
  • Permission-less: No restrictions on participant entry.
  • Autonomy: Nodes can perform transactions without third-party intervention.
  • Ownership and Uniqueness: Blocks include transaction information, owner details, and a unique hash code.
  • Irreversibility and Persistency: Transactions, once added to the chain, are irreversible.
  • Immutability: Timestamps and controls ensure stored data integrity.
  • Transparency: Involved parties can access and trace stored data.
  • Auditability: Securely linked blocks facilitate transaction verification and tracking.
  • Provenance: Digital information attached to products proves authenticity and origin.
  • Censorship Resistant: Transactions cannot be censored, as the network operates without controllers.
  • Open Source: Network participants can access the source with a sense of hierarchy.

However, not all features are universally desirable, as the permissionless property could introduce security concerns. Blockchain implementation choices, such as block validation and access control, security measures, and blockchain authority, categorize blockchains into public, private, and consortium blockchain types. The latter includes permissioned or hybrid blockchains, emphasizing the importance of thoughtful design and implementation considerations in leveraging blockchain’s potential effectively.

What Is Decentralized Finance (DeFi)?

Decentralized finance (DeFi) is an emerging financial technology based on secure distributed ledgers similar to those used by cryptocurrencies.

In the U.S., the Federal Reserve and Securities and Exchange Commission (SEC) define the rules for centralized financial institutions like banks and brokerages, which consumers rely on to access capital and financial services directly. DeFi challenges this centralized financial system by empowering individuals with peer-to-peer transactions.

Key Takeaways 

  • Decentralized finance, or DeFi, uses emerging technology to remove third parties and centralized institutions from financial transactions.


  • The components of DeFi are cryptocurrencies, blockchain technology, and software that allow people to transact financially with each other.


  • DeFi is still in its infancy, subject to hacks and thefts because of sloppy programming and a lack of security testing before applications are launched.

How Decentralized Finance (DeFi) Works

Through peer-to-peer financial networks, DeFi uses security protocols, connectivity, software, and hardware advancements. This system eliminates intermediaries like banks and other financial service companies. These companies charge businesses and customers for using their services, which are necessary in the current system because it's the only way to make it work. DeFi uses blockchain technology as a way to reduce the need for these intermediaries.




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