Are DeFi a huge bubble? Where is the opportunity inside?
This sentence has been around for some time, it is more than almost everything before the concept of decentralization. And we’re talking about decentralized finance or DeFi. for short A concept that has been built on by well-known projects such as a decentralized lending platform MakerDAO with great success. But there’s a lot behind DeFi. It is a complete ecosystem. Credit agreements, security coins, stable coins, derivatives, exchanges and so on, all decorate the wonderful world of DeFi. Does that sound funny? Then wait and see, because DeFi has more wonderful.
Here, we will clarify the most important question: what is the DeFi? We will then introduce you to the vision behind all this. and we will explain the whole content of the DeFi and which promising projects are already in full swing. As in the past, it deserves continued attention because it is not only educational but also exciting.
DeFi? is what
DeFi is essentially just a financial instrument built on the blockchain. Mainly use Ethernet blockchain to achieve this purpose. DeFi applications are mostly based on open-source protocols for creating and issuing digital assets. Their advantages are: because they are parasitic on blockchains, they can resist censorship and improve the experience of financial services. By this way, DeFi achieves an important core standard of encrypted currency, that is, everyone can participate, no matter where he or she lives in the world.
DeFi movement took this idea further. Its goal is to provide a global, open alternative to every financial service today. These services include:
And more. All it takes is a smartphone or a computer with an internet connection.
So you can use smart contracts. People who have read our knowledge about Ethernet Square already know that smart contracts are automatically executed contracts. these make it possible to develop more complex functions rather than simply automatically sending and receiving encrypted currency. A decentralized application is called a dApps.
They exist in the DeFi context dApps, they can
Issue stable coins independently
Support for the completion of credit transactions
Implement advanced investment strategies for automation
How is DeFi different from traditional financial systems?
Certainly, the key question is, why use these DeFi-dApps? After all, all of these products already exist in traditional banks or Wall Street counterparts. Unfortunately, this is true only in some parts of the world. Furthermore, the core difference is that dApps and its associated business processes are not managed by companies, institutions or individuals. Instead, these processes are automatic, and the rules are hard-coded in smart contracts. where they are visible to all and are expressed transparently in the form of code.
Once the smart contract is implemented on the blockchain, it can be executed by itself with little or no manual intervention. As a result, DeFi-dApps is visible to all. DeFi-dApps can be used anywhere in the world with Internet connections. They can resist censorship, and because of the automatic execution of smart contracts and visible code, they can sign and/or use contracts reliably and transparently even without intermediaries.
For no reason, DeFi is currently one of the fastest-growing industries in the field of encryption. More than $20 billion worth of encrypted currency has been invested in related smart contracts. DeFi the most important and popular use cases and projects in the field, let’s take a closer look now.
1. open credit agreements – available to all
open credit agreements may have attracted more attention recently than any other category of agreements in the DeFi field of ethernet. Mainly due to the use of Dai and the fall of other P2P agreements (such as Dharma), as well as the establishment of mobile pools such as Compound, decentralization lending is gaining strong attention, which is also taken for granted. Compared with the traditional lending structure, open decentralized lending has many advantages. It can be realized
Integration of lending and borrowing of digital assets;
Insurance of digital assets;
Immediate transaction processing and new secured loan methods.
(b) Increase access to traditional services for those who do not have them;
Standardization and interoperability can reduce costs through automation.
Mortgage lending using open agreements (such as MakerDAO and Dharma) aims to minimize the need for trust. They achieve this by leveraging the capabilities of Ethernet Square-based smart contracts. Open agreement lending depends entirely on the scope of the public chain and has some interesting long-term implications for expanding financial inclusion globally. MakerDAO is the most famous decentralized lending agreement.
2. insurance and investment platforms
A well-known securities Token distribution platform, Such as Polymath and Harbor, provides issuers with the framework, tools and resources to launch securities Token on the blockchain. They are preparing their own securities standardization Token contracts (i.e. ST-20 and R-Tokens), Allow automatic compliance and customizable transaction parameters, To meet regulatory requirements. Also, They integrate with brokers, legal persons and other service providers, Assist the issuer in the transaction. For example, The bourse/issuing platform includes Overstock tZERO.
As more participants enter the open financial world, the importance of distribution platforms and investment management systems may grow rapidly, while providing growth for DeFi ecosystems.
3. Decentralized Prediction Platform
Decentralized betting platforms are a striking part of open finance, complex but with great potential. Augur last year launched an ethernet-based anti-censorship platform that allows people to bet on anything. other items such as Gnosis, are also aiming at something similar.
Gambling platforms, or forecasting markets, have long been popular financial instruments to hedge risks and guess global events. Decentralized forecasting markets can do the same, but use encrypted currencies and have no ability to review markets. From political and weather forecasting to hedging the risks of financial or adverse events in the real world, Augur has provided everything.
4. exchanges and open markets
Exchanges function by a decentralized exchange (DEX) to complete. DEX is the asset P2P market of both parties in Ethernet Square, and there is no third party as an intermediary in the transaction. As a result, they differ from centralized exchanges such as Coinbase in this regard. Some DEX also uses highly innovative Token exchange methods, such as atomic exchange and other non-deposit methods, to exchange one asset for another with minimal settlement time and risk.
other types of open markets focused on the exchange of non-substitutable Token (NFT), is often referred to as an encrypted collection. Platforms such as OpenSea and Rarebits facilitate the search and sale of encrypted assets, range from NFT in games such as Cryptokitties to virtual plots in-game Decentraland. Allegedly, Some market platforms, If District0X, Even allow users to create their own exchanges and vote on the management program. The current examples of dex that provide encrypted currency transactions include Binance DEX and etheric Delta.
5. stable currency
Stable coins now have a variety of models. They differ in their way of issuing money, their reserves and their price stability. Stable coins are issued by blockchains Token, designed to maintain a stable value. It is usually linked to external assets such as dollars and gold. Generally speaking, stable coins can be divided into the following three categories:
Encrypted currency mortgage
Legal currency collateral
Stabilization of coins
A stable currency of an encrypted mortgage includes Dai. However, the French currency mortgage stable currency is the most popular stable currency in the market. Above all Tether, there are many alternatives. The models of these stable coins are not very different from each other. For all these stable coins, users must trust suppliers. Some provide regular and voluntary audits to build the necessary trust through transparency.
The algorithm stabilizes coins without centralization or encryption assets. they are built on an algorithm to maintain a stable value. In short, the algorithm regards to supply and demand as parameters and adjusts them accordingly to maintain a balanced proportion. The basis is the forerunner of this kind of project.
DeFi future – potential or all hype?
And, of course, the final question is, what is the potential of the entire DeFi movement? Basically, in the field of encrypted money, there are a lot of overhyped things, and the actual product has no chance of achieving exaggerated expectations. followed by severe disillusionment and disinterest. The situation is somewhat different for DeFi, however, because there are already some finished products like MakerDao and the market has a good response.
However, we are at a very early stage of the whole DeFi movement. But the potential behind it is enormous. Even if there is only DeFi success in lending in the future, it is enough. If DeFi ecosystems can lend on better terms than most national banks and other lending institutions, this could lead to global adoption.
But this is one of the biggest obstacles we still have to overcome in the DeFi industry. First, more education is needed to make the public aware of the existence of this alternative. As before, only a very small number of people are concerned about encrypted currency and blockchain technology. Fewer of them deal with DeFi. On the other hand, the user-friendliness of such products must be greatly improved to set the necessary course for the general public to use it and to adopt it globally.