Cryptographic tokens are a new type of asset that can do many different economic jobs. They can be created and traded easily, potentially turning many real-world assets or rights into "bankable funds." Turning real assets, digital assets, and access rights into tokens could change the role of central bank money, which now acts as a major way to exchange value in specific areas. As more people start using Web3 and its benefits grow, this change could happen faster. The rapid creation of these tokens shows that a new economic system is forming. This new system could blend the money system, financial system, and real economy together. Many new decentralized financial (DeFi) applications are appearing that do more than just simple payments. They allow people to issue, trade, lend, and protect assets easily, and also include things like gaming and NFTs.

The term "DeFi encompasses any decentralized and permissionless financial application that builds on top of the blockchain, including privacy-preserving payment systems (privacy tokens), stability preserving payment systems (stable tokens), P2P exchanges (token exchanges), P2P fundraising (token sales), and P2P credit and lending (decentralized lending). P2P insurance, and a growing list of P2P derivatives. These Web3-based DeFi applications open traditional financial services to the general public, mitigating current inefficiencies of financial markets.

The current financial system, even when using electronic methods, needs many middlemen to reduce risks, make markets, and keep money safe. This is because of the way our Internet is set up, relying on central servers. In a tokenized economy, blockchain solutions make things clearer, more accountable, and more efficient. Because blockchains are public, DeFi (decentralized finance) applications can be used by anyone with an Internet connection and a Web3 wallet. Once set up, these DeFi apps run on their own with very little need for middlemen, except for updates, fixing bugs, and solving disputes.

A smart contract is a set of promises, specified in digital form, including protocols within which the parties perform on these promises. A smart contract, just like a vending machine, has logic programmed directly into it. That logic sets up how users must interact with the contract. If users interact outside of the scope of the programmed logic, then the program fails. Just like if you choose not to deposit money in a vending machine, it will simply not dispense a drink to you. Same with a smart contract! But smart contracts are cooler!

If users choose wallet solutions, they keep their private keys and have full control of their funds. This could remove the need for many financial services that currently reduce risks, help make markets, or protect funds from theft. Anyone can check and fix smart contract code, which helps the DeFi (decentralized finance) system grow quickly. All token transactions are public and can be verified by anyone, making financial services work together better and reducing problems in the market.

Combining various DeFi solutions, such as "stable tokens," "decentralized exchanges," and "decentralized lending," produce completely new products available to retail investors and the general public. Any private person could tokenize their real assets and use them as collateral for P2P lending solutions without bureaucracy by using a combination of simple DeFi applications. Such new services change the dynamics of our economic system and contribute to the merging of the real economy and the financial system, making their distinction increasingly impossible.