Exploring Core DeFi Primitives and Mechanics

DeFi’s power comes from a few essential primitives that work together to give users control, create liquidity, and generate yield without intermediaries. In this article we explore the most essential DeFi primitives: token standards and utility, vaults, and interest‑bearing tokens. Learn more about token standards and their role in DeFi in Token Standards and Their Utility in DeFi.

Token Standards and Utility

Tokens are the currency of DeFi. To understand the foundations of these tokens, see Token Standards and Their Utility in DeFi.

ERC20 – The Fount of Fungible Tokens

ERC20 is the most ubiquitous token standard for fungible tokens. For a comprehensive guide on how DeFi tokens evolve from primitives to vaults, read From Primitives to Vaults A Comprehensive Guide to DeFi Tokens.

Vaults – The Modern Custodial Primitive

Vaults are the engine that transforms raw tokens into yield‑bearing assets. Learn how vaults and interest‑bearing tokens operate in Vaults and Interest Bearing Tokens How They Operate.

Interest‑Bearing Tokens – The Yield‑Accruing Primitive

Interest‑bearing tokens let users earn passive income on their assets. The mechanics of vaults and interest‑bearing tokens are explained in detail in Vaults and Interest Bearing Tokens How They Operate.

Interplay Between Primitives

The beauty of DeFi lies in how these primitives compose to form complex financial products. For an overview of how DeFi tokens progress from primitives to vaults, check out From Primitives to Vaults A Comprehensive Guide to DeFi Tokens.

Future Directions

Composable DeFi layers allow developers to stack primitives with minimal friction, a concept explored in Vaults and Interest Bearing Tokens How They Operate.

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