The blockchain space is an amazing one in its infancy and brings a lot of interesting concepts daily. If there is one thing to agree on as regards Blockchain, it is to make the way we carry out our daily activities better, especially in the financial system.
DeFi, NFT, and Metaverse are some of the amazing concepts that have been creating disruption in the blockchain space. Defi is changing the way a financial transaction is carried out. NFT is causing a major disruption in the art sector and Metaverse is a whole concept that can be applied to a wide range of life, ranging from Real Estate, Art to Tourism.
What is DeFi?
Defi in the simplest form can be defined as Decentralized Finance. The idea of decentralization is to ensure the removal of the third party when carrying out financial transactions. You become the custodian of your finances.
The present financial system run by the banks is centralized and regulated. The government of a country can make a law that can affect the way you transact. You have ceded control of your money to the bank.
Decentralized finance, however, uses Blockchain technology to eliminate the centralized financial models by ensuring that transactions can be carried out from any place in the world without any restriction or control from financial institutions and countries of the world.
What is the currency used in DeFi?
DeFi might be different from centralized finance, however, they still share some similarities. DeFi also uses a currency. The currency of DeFi is a cryptocurrency, which is a digital currency or as some experts in the Blockchain industry refer to it “Currency of the internet”.
As there are various financial institutions in the traditional finance world, there are also different DeFi platforms and some have their own governance token.
One of the advantages of owning a DeFi project governance token is getting to be involved in the decision-making process on the platform. Unlike the traditional finance system where decisions can be made without customers being involved.
3 Amazing DeFi projects in the Blockchain Ecosystem.
This is one of the biggest DeFi projects in the Tezos ecosystem. youves is a decentralized, non-custodian, and self-governed platform for the creation and management of synthetic assets. Synthetic assets are assets that mimic the original assets, for example, uUSD is a synthetic asset on youves that is pegged to the US dollar and YOU is the governance token of the youves platform.
Holders of YOU can vote on the platform for amendments and can also make a proposal for amendments that are subjected to votes by other holders of the governance token of the platform.
There are three major concepts on youves:
Minting: Minters on youves leverage their crypto exposure by locking tez. If you decide to become a minter on the youves platform, you can mint and trade uUSD to increase your exposure on the Tezos ecosystem. As a minter you equally earn YOU.
Savings: To benefit from this feature, you need to get uUSD, a new synthetic asset on Tezos that currently pays 6.66% interest on uUSD per year.
You can save uUSD or uDEFI to earn interest. The uDEFI index is a price index tracking the performance of the tokens of these five large and successful DeFi projects (in alphabetical order): AAVE, CAKE, LINK, LUNA, and UNI.
Staking: To be a part of youves and its governance, you could stake your YOU and earn a share of platform profits.
The Maker Protocol is the platform through which anyone, anywhere can generate the Dai Stablecoin against crypto collateral assets.
MakerDAO is a decentralized organization dedicated to bringing stability to the cryptocurrency economy. The Maker Protocol employs a two-token system. The first is Dai, a collateral-backed stablecoin that offers stability.
The Maker Foundation and the MakerDAO community believe that a decentralized stablecoin is required to have any business or individual realize the advantages of digital money. Second, there is MKR, a governance token that is used by stakeholders to maintain the system and manage Dai. MKR token holders are the decision-makers of the Maker Protocol, supported by the larger public community and various other external parties.
Maker is unlocking the power of decentralized finance for everyone by creating an inclusive platform for economic empowerment; enabling everyone with equal access to the global financial marketplace.
Aave is an open-source and non-custodial liquidity protocol for earning interest on deposits and borrowing assets. Depositors provide liquidity to the market to earn a passive income, while borrowers can borrow in an over collateralized (Perpetually) or Under collateralized (One-block liquidity) fashion.
What is the future of Defi?
A peep into the history of the financial system from the time of Barter to the Centralized financial system which has been controlled majorly by Banks. It is obvious that every generation has its innovation, the present financial system is tilting towards Decentralized Finance.
A decentralized system is expected to fix the problems in the Centralized system such as:
- Control over funds.
- Hidden charges.
- Heavy collateral on loan.
Decentralized gives room for:
- Gives you control over your assets.
Defi has a lot of use cases apart from asset management such as gaming, insurance, tokenization, and the metaverse.
The Future of Defi is a world whereby people have easy access to financial services through the removal of the barriers faced by people in the traditional finance services like location, net-worth, and social class.
As stated in the introductory part of this article, DeFi is presently in the infancy stage and a lot of amazing work has been done to position it as the future of finance.
The DeFi projects are gradually catching up with traditional finance, despite it also having some bit of challenges, however, every innovation is bound to have this at inception.
It is still a bit early to see where the Defi project will get to when it reaches maturity, however, we can hope for a future of finance that is decentralized, equitable, fast, and egalitarian.
Written By Adeyemi Boboye