Over the past 2 years, the blockchain space has started to see projects achieve real traction. Although extremely early, the movement of decentralized finance or DeFi has been achieving real progress with over $500 million in value currently locked up.
The premise of DeFi, as conveyed in its name itself, is to challenge the traditional rails of finance. Through smart contracts and token economics, DeFi’s ambitious goal is to allow anyone, anywhere to gain access to a variety of financial services.
We’ve seen the rise of all types of use cases: ranging from decentralized lending/borrowing, prediction markets, derivatives, payments, insurance, stablecoins, and so much more.
A few projects we’ve been looking at that we find interesting:
Compound is a decentralized money market protocol that allows users to lend and borrow crypto. Interest rates are determined algorithmically by supply and demand. For example, increased demand for borrowing crypto on the platform will start to raise interest rates. On the lending side, the higher interest rates should incentivize lenders to supply to the protocol, driving interest rates back down. There are many other factors to consider, including the type of crypto, volume, and broader market conditions. However, Compound has shown the true potential for programmable money with so many iterations built on top of their cDAI, for example.
MakerDAO is the ecosystem that manages the DAI stablecoin. With cryptocurrencies presenting immense volatility, it becomes difficult to actually use them in day-to-day transactions. Maker allows users to lockup collateral, such as ETH, and receive DAI in return. This DAI can be used to transact, purchase more crypto, or be used in applications.
Unlike USDC or Libra, DAI is a decentralized stablecoin. Its stability is managed entirely by MKR token holders. With the upcoming launch of multi-collateral DAI and the DAI savings rate, there is potential for DAI to be widely adopted across decentralized finance.
InstaDApp provides an intuitive gateway to access DeFi. Accessing and interacting these smart-based platforms can be challenging for new users; however, InstaDApp abstracts many of the complexities, creating one easy to use interface. Users can lend on Compound, open a CDP on Maker, or interact with Uniswap pools.
As more and more DeFi protocols come online, easy to use tools such as InstaDApp will be critical to onboarding more users into DeFi.
These are just a few of the projects building the novel DeFi ecosystem. Lending, borrowing, and getting leverage permissionlessly is a revolutionary concept. In traditional finance, these types of activities face immense regulatory restrictions and frictions. Although still early, DeFi is starting to level the playing field for basic financial services.
OPEN Exploring DeFi: Potential Ideas and Projects to Explore
With DeFi as a new and early focal point in the blockchain space, we are currently analyzing potential ways developers can add value to the DeFi ecosystem with our existing technology, including our platform and blockchain technologies. Developers have a number of potential options where they can integrate OPEN technologies with DeFi in integrating the benefits or features that DeFi technologies can offer their applications and audience:
OPEN State Interoperability:
Utilizing the different number of stablecoins available such as DAI, USDC, BUSD, EOSDT, etc. that are on different blockchains. With OPEN state, applications can track changes across these chains and update their database (both on and off chain) accordingly.
DAI on OPEN Chain:
DAI is the stablecoin that is governed by the MakerDAO system. Most cryptocurrencies experience heavy day-to-day volatility. This does not make a good medium of exchange as the vendor does not know how much they are receiving and has to deal with the price risk of the crypto used. DAI is designed to maintain its stability, providing tremendous utility to pay for goods and use in DApps. However, due to its decentralized nature, DAI is outside the control of one company or jurisdiction.
The original ERC-20 version of DAI would not necessarily be compatible with any DApps on OPEN Chain. As a result, to utilize OPEN a supply-pegged version of DAI could be created that is compatible with Ethereum. DAI could be locked in a smart contract on Ethereum and an OPEN Chain version could be released to use on DApps.
With the OPEN API, any developer could integrate payments into their website with just a few lines of code. DAI, along with the integration of the OPEN API, could allow any customer or vendor to use and accept DAI, ultimately accepting crypto as payments without dealing with significant price risk.
OPEN & Token Exchange:
For example, one way the OPEN API can be used is through Kyber.
Kyber is a protocol that enables token swaps. Through Kyber, anyone can set up pools of tokens that are used for exchange.
With the OPEN API or DApps in general, Kyber could be integrated to tap into their pools of tokens. Through a reserve system, token holders provide liquidity to those looking to trade through applications such as MyEtherWallet, for example.
A customer could pay with any cryptocurrency. The underlying cryptocurrency would then be exchanged for DAI and sent to the vendor.
OPEN Chain & Gaming:
With OPEN Chain’s high TPS, we could also expect applications in gaming. Gaming is one mode of applications developers are expected to utilize blockchain technologies and cryptocurrencies. The anticipation is the acceptance and use of purely digital currencies with applications and having fee savings across both developers and consumers of gaming applications. High TPS chains would naturally be the underlying ledger technology of choice for the gaming industry.
Let us know what you think about DeFi in our Telegram!