The comparison between DeFi and web3 is a top highlight in tech communities worldwide. However, the answers to “What is the difference between DeFi and web3?” would point to the ways in which the two terms share crucial similarities. You can find a detailed impression of the difference between web3 and decentralized finance by taking a look at the common traits between them. Here are some of the factors which can explain the connecting links and differences between web3 and DeFi.

Permissionless

The review of comparisons between web3 and DeFi draws attention to the permissionless nature of the two solutions. Web3 and DeFi have been designed in a manner that enables easier and more equitable accessibility for users. Permissionless is an important term in answers to “Are DeFi and web3 the same?” as users don’t require permission to participate in the networks. The users and participants in a permissionless network don’t have to depend on authorization from central authorities to access the network.

Web3 focuses on introducing open and public blockchain systems, which can allow the participation of any individual. The permissionless feature in web3 ensures that users can access crypto wallets or any other web-related infrastructure directly from laptops or mobile devices within a few clicks.

You can find the DeFi vs. Web3 divide in terms of the permissionless trait by focusing on the relevant implementation alongside developer usage. DeFi relies on blockchain technology and could offer decentralized access to financial services. On the other hand, web3 suggests a broader term that includes DeFi and other popular decentralized technologies, such as decentralized autonomous organizations, NFTs, and dApps.

Decentralization

The comparison between DeFi and web3 also sheds light on the element of decentralization. Blockchain has gained traction in the world of technology for its ability to introduce decentralization. You can find difficulties in pointing out the DeFi vs. web3 difference as both of them rely on decentralization.

The definition of decentralization suggests that the DeFi or web3 network would remain free from the control of centralized agencies. DeFi and web3 have decentralization through a globally distributed network of nodes responsible for administering the network. Furthermore, web3 and DeFi have to follow decentralization by design.

Web3 utilizes peer-to-peer protocols for creating a decentralized and open network without the concerns of centralization. DeFi leverages blockchain to achieve decentralization that could help in conducting financial transactions without depending on centralized institutions like banks.

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Custody of Assets

Another important aspect in the comparison between web3 and DeFi draws attention to the custody of assets. Non-custodial solutions are unique in the fact that they do not hold user funds in a bank or a centralized financial authority. The answer to “What is the difference between DeFi and web3?” would refer to the flexibility for users in capitalizing on multiple financial instruments.

Users can extract the best results from different financial instruments, such as lending, staking, and borrowing, according to their own conditions. Without the need to rely on centralized authorities, users could withdraw their assets without approval or supervision from the bank.

DeFi applications are generally non-custodial, which implies that users have complete control over the ownership of private keys to their assets. As a result, owners have complete control over how they want to use their assets. On the other hand, Web3 applications can be custodial or non-custodial, depending on the use case. In the case of custodial web3 solutions, a third-party agent or service provider retains control of assets and private keys to the assets.

Interoperability

The next important point of comparison in the web3 vs. DeFi debate would refer to interoperability. It points to the capability of blockchain networks and DeFi protocols to communicate with each other. Interoperability also refers to the flexibility for the seamless sharing of data, tokenized assets, and technology. Blockchain interoperability refers to the extent to which blockchain networks can communicate with each other. It is important to note that DeFi services on one blockchain or a shared blockchain network can exhibit promising levels of interoperability.