A brief look at DeFi projects in different fields
Author: OmniBOLT Enthusiast | OmniLABOdaily column special release
Foreword: The DeFi market is a "meme" that spreads all over the global blockchain industry. This concept that emerged in the community has spread to all corners of the industry since the beginning of 2019, including the development teams of Ethereum, Polkadot, Cosmos, Alogorand and other public chains. Eager to try, the "veteran DeFi" project Lightning Network has expanded its network gratifyingly in the past year, and a number of stablecoins represented by UDST have also made considerable progress in 2019, represented by MakerDAO, dYdX, Compound, Uniswap, etc. DeFi projects are coupled with each other, forming the well-known "DeFi Lego"... Such lively phenomena are too numerous to enumerate in the DeFi field.
"OmniBOLT Enthusiasts", as the first community of OmniBOLT, the world's first stablecoin circulation standard in the Lightning Network, are naturally very concerned about the concepts, structure, and status quo of DeFi such as Lightning Network and stablecoins. One of the most fascinating sections in the country. In the next period of time, "OmniBOLT Enthusiasts" will strive to launch a series of original/compiled/reprinted articles related to DeFi observation and analysis, and explore the charm of DeFi together with the community. This article is the first of the DeFi observation series for "OmniBOLT Enthusiasts", Enjoy~
The vision of cryptocurrency is to make money and payment accessible to anyone, anywhere in the world.
The decentralized finance (DeFi) or open finance movement takes this vision one step further. Imagine that the financial services you currently use every day—savings, loans, transactions, insurance, and other services—are replaced by a global open finance that anyone in the world can enjoy with a smartphone and Internet connection. Related Services.
The above imagination is currently possible on the smart contract (smart contracts) blockchain (such as Ethereum). A "smart contract" is a program that runs on the blockchain and can be automatically executed after certain conditions are met. These smart contracts allow developers to build functionality far more complex than sending and receiving digital currencies. These programs are what we now call decentralized applications, or dapps.
You can think of a dapp as an application built on decentralized technology rather than controlled by a single, centralized entity or company. (Please familiarize yourself with the word, dapp, you will see it frequently in the following).
Although these concepts may sound futuristic - two strangers in different parts of the world communicate directly to form an automated loan without the need for a bank as an intermediary guarantee. . Some DeFi dapps allow you to create stablecoins (a cryptocurrency whose value is pegged to the U.S. dollar), lend money, earn interest, take out loans, trade assets, short/long assets, execute automated, advanced investment strategies.
How are DeFi dapps different from traditional banks and Wall Street institutions?
At its core, DeFi is not governed by an institution and its employees — instead, the rules are defined by code (or, rather, by smart contracts as described above). Once smart contracts are deployed on the blockchain, DeFi dapps can run with little/no human intervention (although in practice, developers usually maintain dapps with upgrades, or fix their bugs).
The code of DeFi is open and transparent on the blockchain, and anyone can audit it. This allows dapps to establish a different kind of trust relationship with users, because anyone has the opportunity to understand the function of the contract or find bugs in it. All transfer activity is also publicly visible. While this may pose privacy concerns, money transfers are by default anonymous and not directly linked to your real identity.
DeFi has been global from day one — whether you are in Texas or Tanzania, you have access to the same DeFi services and networks. Of course, the applicability of regulatory laws and regulations may vary in different regions, but strictly speaking, as long as there is a network connection, anyone can obtain most of the DeFi application services.
Create "permissionless", participate "permissionless" - anyone can create DeFi applications, and anyone can use them. Unlike today's financial services, there are no qualification restrictions and cumbersome form materials in DeFi. Users interact directly with smart contracts through cryptocurrency wallets.
Flexible user experience. You don't like the user interface of a certain dapp? It doesn't matter - you can use a third-party interface, or build your own. Smart contracts are like open APIs that anyone can use to build applications.
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Protocol channel (a protocol network used by users) between Ethereum DeFi, source: Alethio
DeFi is one of the fastest growing areas in the cryptocurrency industry right now. Industry watchers use a new data metric to assess the development of DeFi - "ETH locked in DeFi" - a concept that can be further expanded to "total value of assets locked in DeFi". As of this writing, users have deposited assets totaling approximately $1.48 billion in DeFi.
Let's explore some representative DeFi applications together to further understand DeFi.
Introduction to major DeFi applications
Stablecoins and Decentralized Reserve Banks: MakerDAO
Maker is a stablecoin project, and each DAI (the stablecoin of the Maker project) is pegged to one U.S. dollar, and its value is guaranteed by collateral composed of cryptocurrencies. Stablecoins offer the programmability of cryptocurrencies without the volatility drawbacks of “traditional” cryptocurrencies such as Bitcoin and Ethereum.
Maker is not just a stablecoin project, it is a decentralized reserve bank. People holding Maker’s governance token, MKR, can vote on important decisions such as stabilizing the fee rate (similar to the Federal Open Market Committee of the Federal Reserve voting on the federal funds rate).
Another stablecoin with a different structure is USD Coin (USDC), where each USDC is backed by U.S. dollars stored in audited bank accounts.
Representative of lending DeFi: Compound
Compound is a blockchain-based lending dapp — you can lend your cryptocurrency and earn interest on it. Or maybe you need some money to pay rent or buy groceries, but your money has been invested in cryptocurrency? You can deposit your cryptocurrencies as collateral in a smart contract in Compound and then borrow against it. Compound's smart contracts automatically match lenders and borrowers, adjusting interest rates based on supply and demand.
Automated Token Swap: Uniswap
Uniswap is a cryptocurrency exchange that runs entirely on smart contracts, allowing you to trade popular coins directly from your wallet. Unlike exchanges like Coinbase, Uniswap does not store your cryptocurrencies nor your private keys. Uniswap uses a mechanism called automated market making to automatically settle trades around market prices. In addition to trading, any user can also become a liquidity provider by providing tokens to Uniswap, and share the fee income. This is called "pooling".
prediction market
prediction market
Synthetic Assets: Synthetix
Synthetic Assets: Synthetix
No Loss Savings Game: PoolTogether
No Loss Savings Game: PoolTogether
The composability of DeFi endows it with infinite possibilities. PoolTogether is a no-loss savings game where users deposit DAI into a shared pool. At the end of each month, one lucky participant wins all the interest and everyone else gets their initial deposit.
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Global Distribution of Lightning Network | Source ACINQLN Explorer
The Lightning Network is a Layer 2 solution based on Bitcoin. It aims to realize instant and small payments through off-chain channels, release the resource pressure of Layer 1, and improve the overall performance of the blockchain network. It is currently one of the most successful expansion solutions in the global blockchain industry, and it is also one of the most critical DeFi applications.
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Growth of LN | Source: AIethio
The lightning network is generally considered to be an important basic component of the blockchain industry. It may be one of the most important technical directions emerging as the focus of the industry in 2019. The popularity of the "Lightning Torch" activity around the world is precisely for this It proves that in the past year, the significant growth of the nodes, channels, network capacity, capacity of each channel and other indicators of the Lightning Network visible to the naked eye is an affirmation of Lightning Network's industry status.
According to data from DAppTotal, as of February 22, 2020, the total value of tokens locked in DeFi was 1.48 billion US dollars, and the total value of tokens in LN accounted for about 7% of it.
If you consider that the liquidity of Bitcoin itself is significantly stronger than that of any token (The Block's research pointed out that the liquidity of Bitcoin is 10 times that of Ethereum, and the liquidity of tokens with smaller market capitalizations cannot compete with Bitcoin. On par), Bitcoin has a stronger consensus, a wide range of use cases, and the compliance status of being recognized as a commodity in major countries and regions such as China and the United States. The Bitcoin DeFi ecosystem represented by the Lightning Network may have greater potential in the future. "OmniBOLT enthusiasts" believe that this is also an important significance of the OmniBOLT protocol.
An important infrastructure for DeFi: the OmniBOLT protocol
OmniBOLT is formulated by the Omni Specification Committee, owner of OMNI, a well-known brand in the global blockchain industry. It is the world's first stablecoin circulation standard within the Lightning Network, and it is also the second major agreement launched by the Omni Specification Committee after OmniLayer.
For the first time, OmniBOLT connects all public chains and related assets to channels designed according to the principle of Lightning Network, allowing them to interact within the Onion Network, which will greatly enhance the interactivity of each public chain.
How to simply understand the significance of OmniBOLT to the DeFi ecology, or the wider blockchain ecology:
Stablecoins are compatible with the Lightning Network, allowing Bitcoin to further increase its value and upgrade to a pure SoV (Store of Value, that is, a store of value). The payment scenario will be delegated to many stablecoins supported by OmniBOLT through the Lightning Network, so that all Users enjoy an experience comparable to that of legal currency payment;
The use cases of digital assets are extremely rich. "Landability" is a matter of general concern inside and outside the industry. With the support of OmniBOLT, all kinds of digital assets can gradually enter the lightning network. With the latter's nearly 12,000 nodes, it can realize financial, software, business, market transactions, Use cases in massive scenarios such as hardware and education are obviously the most effective implementation;
Define the circulation norms of the new digital economy. The circulation of currency is a prerequisite for the prosperity and development of a commercial society, and before that, it is the meaning of the question to formulate the standards and framework of circulation. According to the design of OmniBOLT, in the early stage, USDT will enter the Lightning Network circulation, and in the future, more diversified digital assets will enter the Lightning Network through OmniBOLT, and rely on the basic specifications defined by OmniBOLT to carry out "deposit, withdrawal, financing, lending, borrowing" etc. A range of commercial financial operations.
"OmniBOLT Enthusiasts" learned that the current OmniBOLT code (https://github.com/LightningOnOmnilayer/LightningOnOmni) and the Readme document (https://github.com/LightningOnOmnilayer/Omni-BOLT-spec) have both been launched on GitHub. I believe it can be a friend who seeks a deep understanding of the OmniBOLT protocol itself and its great value to DeFi and blockchain ecology more content.
Reference: https://blog.coinbase.com/a-beginners-guide-to-decentralized-finance-defi-574c68ff43c4
OmniBOLT is the world's first stablecoin circulation standard within the Lightning Network, and it is also the second major agreement launched by the Omni Specification Committee after OmniLayer. "OmniBOLT Enthusiasts" is the No. 1 community of OmniBOLT, dedicated to sharing all content related to the OmniBOLT protocol, and maintained by community members. More Blockchainers who love Lightning Network and stablecoin related content are welcome to join the community.
