Traditional finance VS DeFi in terms of options : defi

Traditional finance VS DeFi in terms of options : defi


  1. #TradFi

In TradFi we have liquidity providers, buyers, and sellers. Liquidity providers are like market makers and you have them in all these big financial markets then we have people who are actively buying and selling or the buyers and sellers and liquidity providers or market makers have to fulfill the trade so in general, that’s how traditional finance works and it works in options because in the options contract you buy them from the liquidity providers.

2. #DeFi

In DeFi we have something similar. You have liquidity providers, buyers, sellers, and a protocol. The protocol is the machine or the technology to execute all these different buying and selling.

Liquidity providers might not be one big individual market maker to provide liquidity instead it could also be a lot of individual decentralized market makers or autonomous market makers coming in together to become liquidity providers.

Then to be providing all these options contracts to buyers and sellers and the protocol could also be the system issuing tokens, executing smart contracts, or running smart contracts.



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