We always see Layer 1 or 2 and DeFi coins on various exchange sites and sometimes we invest in these coins. But to be honest, many of us do not know that there are some key differences between them or that they are different. We don't have a good idea about layer based coins and DeFi coins but we invest in them hoping for some profit. Today I will try to explain in detail what are the main differences between these two coins. Because it is very important for us to know about these two. If we have a good idea about the things we usually invest in, we can get good returns from them. So let's discuss about it.

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Layer1

Core Blockchain:

Layer 1 based coins are usually the core coins of a particular blockchain. It can be said that all these coins have the same specific blockchain that is built on that blockchain. Even when they are traded or transferred, it works through such blockchains. For example, Bitcoin (BTC), Ethereum (ETH), and Solana (SOL). which have certain blockchains and are the most familiar blockchains we know.

Foundation of the Network:

Since such coins are based on the blockchain, these coins act as the foundation of the blockchain. Usually when these coins are transacted or transferred from one exchange to another exchange site or elsewhere, all these operations are conducted through this network.

Security and Scalability:

Since Layer 1 coins are based on blockchain, their inherent security is much higher than other coins. As they are built on blockchain, these blockchains ensure the security, scalability, and decentralization of the network within it.

DeFi

Decentralized finance is a financial system that allows users to access a wide range of financial services, including borrowing, trading, and investing, without the need for intermediaries like other financial institutions. Defia is a financial system based on a decentralized (decentralized) platform.

Decentralized Finance:

DeFi coins are used within Decentralized Finance (DeFi) protocols. DeFi is built on blockchain technology, which provides a readable and transparent way to read financial transactions. It is a peer-to-peer system that eliminates middlemen like banks, resulting in lower costs and increased convenience. For example, UniSwap (UNI), Ave (AAVE), and Chainlink (LINK).

Application Layer:

Although these coins belong to decentralized finance, they are usually built on top of the Layer 1 blockchain. They use layer-based blockchains to complete transactions. Hence they are used in layer based blockchain applications.

Financial Services:

DeFi coins are used in various financial services such as lending, borrowing, trading, and yield farming. It is a peer-to-peer system that eliminates middlemen like banks, resulting in lower costs and increased convenience. There are various DeFi apps including decentralized exchanges (DEXs), lending protocols, prediction markets and stablecoins.