Decentralized Finance ( Defi) | Part 2
Hello all Today i have come with the 2nd part of defi explanation. As defi is a good project and future of crypto,so it is not much easy to explain. But I am trying as clearly as i can.
So, let's start the 2nd part. Source
DeFi Products
Decentralized Finance is a new technology that came into existence in 2019.
Although it is the latest technology, DeFi has tons of products out there. Let’s
understand them one by one.
MakerDAO: MakerDAO is a stablecoin project pegged to the US dollar and
backed by crypto. The Decentralized Autonomous Organizations (DAO)
maintain the Maker protocol and its lending of DAI stablecoin. MakerDAO
ensures that the DAI stablecoin retains its value at $1. The MKR token
holders vote on how much collateral should be held in each Maker CDP
software. The token holder’s votes and the collateralization ratio are noted
into the blockchain and the collateralization rule is carried out
automatically.
Aave (LEND): Aave is a DeFi lending protocol where users can borrow and
lend cryptocurrencies for stable and varying interest rates. Lend is a native
token of Aave which offers the traders with some discounted fees. It uses
Nexus Mutual to protect users against smart contract risks. It offers the most
diverse range of DeFi collateral of any lending protocol in the market. Aave
supports nearly 20-Ethereum based assets.
Compound:Compound is a popular DeFi lending and borrowing platform
which allows any individual to lend & borrow unless they have relevant
crypto assets to lend or use as collateral. Once the individual decides to lend
or borrow their request is matched automatically with the respective lenders
& borrowers. They can adjust the interest rates depending on demand,
supply, and open lending protocols.
Uniswap: Uniswap is a cryptocurrency exchange platform that allows any
individual to engage in Decentralised Finance. This exchange platform runs
on smart contracts and allows users to trade from their wallets. Users can
become liquidity providers to supply crypto to Uniswap in return for a small
fee. This platform uses Automated Market Making to settle trades near
market price automatically.
Augur: Augur is a prediction market platform where an individual is
rewarded for correct predictions. The users can vote on the outcome of
events by giving certain value to the vote. In this product, users can buy and
sell shares in the outcome of an event. For example, the difference for Bitcoin to hit $10.00 within a month which means a share on either side
costs$0.50 which accounts for a total of $1. Hence if the user predicts right
then he will receive $1 in return. The whole concept of Augur is based on
crowd wisdom.
dYdX:dYdX depends on liquidity pool with rates. They do not participate
in p2p loans as there is no guarantee about the liquidity. This platform
focuses more on the use-cases of margin trading. Users can open margin
positions with a resistance of up to 4x. The dYdX smart contract holds the
money sent by the trader into the contract and sells the deposit. If the trader
wants to close the margin position the smart contract will buy the lent
amount. Hence, if the trade is successful then the user will receive his
deposited amount with some good profit.
Set Protocol:Set Protocol is a DeFi product where users can create a set of
underlying assets. The users can also set management rules like how the
basket should be rebalanced and when this should happen. Hence the users
can create strategies in the smart contract. There are two categories of
protocols which are:
o Social trading in which humans can execute strategies.
o Hard-coded rules which define the guidelines of how the contract
should trade.
Opyn: Opyn is a DeFi product that offers insurance to its DeFi users. This
platform allows users to be safe from both technical and financial risks like
hacks, bank runs, or even administrative key compromises. If the user comes
across any such risks, then he can claim for a payout to get back their
deposited amount.
Decentralized Finance (DeFi) Benefits
There is no need for middlemen, no extra charges, and transaction times in
Decentralized Finance (DeFi).
Apart from these few benefits, this platform has a
lot more benefits let’s have a look at them:
1. Multinational access to financial services
Anyone who has an internet connection and a smartphone can access their
financial services through Decentralized Finance. DeFi treats all its traders equally
whether it is a top trader in a financial firm or a farmer in a remote area in India. It also eliminates the barriers of status, wealth, and location to provide global access
to all the traders.
2. Permissionless finance
According to a study, 1.7 billion people worldwide are unbanked. In India, nearly
80% of the citizens have bank accounts, but half of them were inactive. The reason
for this may be that they do not have identification documents and credit scores
which are necessary to open bank accounts and take loans. DeFi application
MakerDAO allows anyone to take a loan unless they have ETH to use as
collateral.
So,it was for today's part.i may need 1 more part. As if i tell everyone in a single blog, people will not read it. So,i am doing it by part and part. Hope you all are understanding. Thanks all.
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