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With the latest update, DeFiChain now supports decentralized loans and assets. The DeFi protocol aims to create fierce competition for the traditional financial market.
The DeFiChain was created two years ago from a Bitcoin hard fork to build the world of decentralized finance as a Layer 2 solution in the ecosystem of the mother of all cryptocurrencies. Now the DeFi protocol was on November 15th with the new update. Strong canning Live.
While asset tokens aren’t new territory for many crypto enthusiasts DeFiChain they show some differences with conventional providers. While configuring the asset token function as a dApp on the blockchain, the applications in DeFiChain are natively anchored at the consensus mechanism level. Therefore, DeFiChain works completely without smart contracts or a virtual machine to implement DeFi applications. This reduces the risk of smart contract, the risk of decentralized systems being duped, to a minimum.
The strategy of the protocol is based on “reverse engineering”: the improvement of existing applications and their native programming within an ecosystem to reduce the attack surface. DeFiChain has its own decentralized exchange, offers its users the opportunity to trade liquidity mining and betting, and with the latest update, opens the doors to the world of decentralized assets and loans.
Stock trading in the age of cryptocurrencies
Deploying decentralized assets offers the opportunity to democratize traditional securities trading. This allows anyone with internet access to invest in synthetic assets in a completely decentralized way. Requirements such as a bank account or access to a broker are no longer applicable.
Such a decentralized asset is a token on the blockchain that is tied to the value of the “real” asset. This type of asset replication is also known as syntheticthat Active. Ultimately, users invest in a kind of copy of the asset and therefore do not acquire direct stakes in the respective company. However, as a result, tokens are not considered securities and are tax-free in many countries after a one-year holding period.
U-Zyn Chua, co-founder of DeFiChain, announced that the hard fork enables “one of the most important use cases in smart DeFi without a contract: decentralized tokenization and decentralized lending.” He also claimed that this means that “for the first time, crypto users can tokenize assets using BTC and DFI (DeFiChains native token) without a core part.” This has the advantage that users can “generate cash flow and hold long cryptocurrency positions” at the same time.
How do you generate cash flow with decentralized assets?
For decentralized token trading to be possible, a pool of liquidity is required. This enables indirect trading of various assets, in which users trade with the respective group and not directly with each other. This group always contains the currency pairs required for a trade. For example, you could pay for a stablecoin like dUSD (DeFiChain’s decentralized dollar stablecoin) in a pool and take out a Tesla stock token in return.
The so-called liquidity mining is used to guarantee a certain level of liquidity in a group. Users are responsible for ensuring the required commercial liquidity in a group.
The liquidity of the pool acts as an intermediary for decentralized transactions. In return, users have the opportunity to receive rewards for their “loans”, which consist of transaction fees and mining rewards. These are still very high, especially in the initial phase. Unlike traditional stock trading, clients benefit not only from the price increase, but also from the rewards.
Ultimately, DeFiChain is trying to create a lucrative alternative to the traditional financial industry. Because in addition to Liquidity Mining Rewards, small investors can only buy fractions of traditional assets, such as stocks, and benefit from the price gains. Even in regions where bank accounts are not the norm in society, decentralized loans and assets offer enormous potential.
You can find more information on exactly how decentralized asset trading works on DeFiChain here.
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