DeFi is an independent ecosystem open to all users. Unlike traditional finance, where a third party is in charge of your money, in DeFi, only you, the investor, is in charge. As of early September, the size of the decentralized finance market is $46.8 billion.
Popularization of DeFi
DeFI is now just at the stage of skepticism, like the blockchain once upon a time. But gradual steps towards DeFI are already visible: the Dutch bank ING Bank analyzed the risks and opportunities associated with DeFi, and concluded that “the best result is if centralized and decentralized financial services cooperate” .
The list of current and promising DeFi projects is very dynamic. Consider the top 5 popular tokens based on market capitalization.
Dai is created based on a loan and repayment process with excess collateral facilitated by MakerDAO smart contracts in the form of a decentralized program. Ether or other cryptocurrencies are accepted as collateral from users, and they can lend against the value of their deposits and receive freshly generated Dai.
Once the loan and accrued interest are repaid, the returned Dai is automatically destroyed and the collateral becomes available for withdrawal.
Avalanche started out as a protocol for resolving consensus on a network of untrusted machines. After a research phase, a startup company was founded to develop a blockchain network that meets the complex requirements of the financial industry. In September 2020, the company launched its native Avax token.
The protocol has four main interrelated mechanisms that make up the structural support of the consensus tool - Slush, Snowflake, Snowball and Avalanche.
Consensus protocols are at the heart of the state machine replication problem, which aims to ensure that a set of machines reach agreement on a network even if a subset of machines is corrupted.
It is a project created by a group of developers and organizations to facilitate interoperability between different blockchains. Indeed, one of the main problems that cryptocurrency users constantly face is that there are not many bridges connecting Ethereum and Bitcoin. The creators of WBTC insist that WBTC helps optimize bitcoin for decentralized use cases in the Ethereum ecosystem due to the standardization of bitcoin in the ERC-20 format.
The creators of WBTC explain the need for their coin by the widespread use of Bitcoin. The market capitalization of Bitcoin is much higher than the market capitalization of Ethereum in US dollars. At the same time, it is almost impossible for BTC holders to take advantage of a large part of the Ethereum network-based DeFi and DApps ecosystem or use tokens outside of Ethereum on decentralized exchanges.
Uniswap is an Ethereum-based decentralized exchange that allows users to exchange ERC20 tokens. The platform is based on an open protocol powered by smart contracts.
Uniswap provides a much-needed DEX experience to meet the needs of a variety of users such as hardcore traders and newcomers. Changes to the protocol are voted on by the owners of the native cryptocurrency and a governance token called UNI, and then implemented by the development team.
LINK is a crypto asset that powers Chainlink's decentralized oracle network. This network allows smart contracts on the Ethereum platform to securely connect to external data sources, payment systems, and application program interfaces (APIs) that exist outside the blockchain.
Since some smart contracts cannot be executed without information outside the network (for example, fluctuations in the price of a certain asset). To solve this problem, oracles are used - they find and verify real-world events and transfer this data to smart contracts on the blockchain.
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