What is Defi - Discussion

Question about the layers of DeFi, as shown in slide 3 of “Origin & Future of DeFi”. What is the difference between layer 3 “The Application Layer” and layer 4 “The User Aggregation Layer”?

Btw I thought “layer 2 solutions” are considered sidechains connected to the main blockchain. Seems like the 4 layers of DeFi are separate from the idea of layer 2 solutions. @amadeobrands, is that correct, and what is the source of this 4-layer model?

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The way I understand this is layer 3 is the collateral-to-stablecoin layer. That is its only function. Even if you build your own app in DeFi and do not use the mentioned options in the list, this layer is needed. The reason you want to convert to a stablecoin is to achieve liquidity. Layer 4 allows for commerce to occur on a value-locked level, whereas if you were dealing with the collateralized asset directly, value could fluctuate significantly.

The 4 layer model is how these options maintain decentralization while still having a consensus layer attached. Other 2 layer options would have to be CeFi, if I understand correctly.