📚 Layers of DeFi


The DeFi ecosystem, consistent across most blockchains, are currently structured three layers.

  1. Layer I: DeFi products that have direct relationship with the DeFi economy, we could define them as "Core" or "Core DeFi". These are things like lending and borrowing and liquidity providing. Provider of both types of platforms earn a return on their investment and capital. They can be in forms of interest, fees, or platform token rewards.

  2. Layer II: As Layer I platforms are built to provide a specific service, their yield generation mechanics are not always optimal. Other times, due to how Layer I platforms structure their services and rewards, certain gaps exist where users can optimize and maximize yields through simple compounding strategies. Layer II platforms and products tries to automate and create products around these strategies. They are "yield optimizers" or "Vaults".

  3. Layer III: This is a new layer, Feeder Finance will likely be among the first Layer III service and Auto Diversify the first Layer III product on BSC. Layer III products and platforms will likely move into aggregating DeFi products and services into bundles and solutions; in other word "structured products". We may also call these "Aggregators". The same way mutual funds structure "tactical funds" that focuses on Technology, or a risk target with Fixed Income/Equity split. Layer III products will aim to create thematic and/or asset base products, rather than strategies. Focusing on the macro, rather than the micro. Ultimately Layer III products will lead to what will likely become Layer IV, which are wealth management products that bundle products (All Layers) into a single portfolio construction.