Next Generation Blockchain: Elrond Releases A DeFi 2.0 Module. What will that change?
2021-03-24 08:58
The DeFi sector is developing rapidly, but nevertheless, users still face problems that prevent massive adoption of decentralized finance. Modern platforms are trying to solve this problem by making DeFi available to a wide range of audiences.
Elrond developers are preparing to launch the DeFi 2.0 module, which will address the main problems of existing platforms. Let's illustrate this in more detail in this article.
What is DeFi and why it is so important to the crypto industry?
When cryptocurrencies first emerged, users could safely store and transfer them to each other. Digital assets are decentralized, but there weren't enough tools to harness the full potential of cryptocurrencies. All services were provided by centralized platforms and exchanges, which contradicted the very essence of decentralized cryptocurrencies.
Decentralized finance (DeFi), a collection of products entirely based on blockchain platforms, became an alternative solution to traditional financial services. As a result of the emergence of a new sector, crypto-holders have access to new financial services that are provided autonomously and managed by smart contracts:
- Swapping;
- Crypto lending;
- Staking;
- Liquidity mining;
- Launchpads.
Despite the rapid growth of the DeFi sector in the second half of 2020 - early 2021, when its capitalization exceeded $40 billion, the industry is still experiencing problems. The first problem is related to the usability of DeFi platforms, because of which it is often difficult for newcomers to use decentralized products, so the bulk of users consists of experienced crypto enthusiasts. In this list of problems, a separate column of issues is occupied by the UX and security issues that even leading platforms such as Maker and Sushiswap have faced.
Another major issue concerns the limitations of the Ethereum platform, on which the lion's share of DeFi applications are built. Due to the large influx of users in the Ethereum network, there are long delays, and the cost of the transactions themselves at their peak exceeded $100. This makes the use of DeFi products unprofitable for users who have less than a few thousand dollars at their disposal.
For this to change, the DeFi industry will need more productive platforms that will make financial services available to a wider audience.
What Will Change With Elrond DeFi 2.0?
The Module Elrond is developing is a new next-generation DeFi 2.0 module that will target the entire community, not just individual enthusiasts, and is built to address the current challenges of the decentralized ecosystem.
The new module will facilitate access to the main DeFi services: liquidity pools, automated swaps, synthetic assets, the launchpad and more. The module will be implemented in several stages during the so-called hypergrowth marathon. The launch of the first phase is scheduled for the 95th day of the marathon (9th of April). The details about the next phase will be announced in the coming days.
The Elrond platform will provide a high-bandwidth blockchain network, low-cost transactions and user-friendly UX, thanks to which holders can easily use DeFi services. The DeFi 2.0 module will run on Elrond's own blockchain capable of processing up to 15,000 transactions per second versus 15 for the Ethereum blockchain.
Elrond aims to harness the full potential of the DeFi ecosystem and provide advanced tools for cryptocurrency users:
- Maiar - the mobile app that automatically & securely creates wallets for users using just their phones, giving everyone intuitive access to DeFi & other blockchain features
- Smart accounts which allow their owners to store a wide range of data such as BTC addresses, emails, social media information and more.
- Meta-transactions, which will be part of the upcoming Elrond update and will provide users with the ability to carry out blockchain transactions without owning cryptocurrency, and network fees will be paid by relayers, for example, app owners
- ESDTs - Elrond Standard Digital Tokens implemented natively into the Elrond protocol, allowing them to be transferred at high speeds and low costs
- NFT; - also integrated directly into the Elrond protocol, with built-in royalties and true ownership, thanks to Smart Accounts
- DNS, which will convert complex addresses to simple names;
The above features will be used to create a new experience for DeFi users, which will be implemented on Elrond DeFi 2.0 module as interconnected platforms, serving different purposes.
Automated Swaps
Automated Market Makers, or AMMs, have provided standalone trading platforms that can be exchanged using smart contracts. This provides secure access to cryptocurrency trading without the need to go through KYC and trust centralized crypto exchanges with your money.
In addition, the commission for swaps at AMM is fixed and depends on the blockchain network, which allows you to exchange large amounts at lower costs since the commission on centralized exchanges varies depending on the size of the order.
Through the Elrond swap module, anyone will be able to provide liquidity in pools to generate yield for their service.
Synthetic Assets
This is another new term that appeared along with the DeFi industry. Synthetic assets are a tokenized representation of underlying assets, which can include stocks, bonds, commodities, precious metals and currencies, as well as derivatives, including futures, swaps, and options. Some exchanges such as Pancake Swap on the Binance Smart Chain (BSC) blockchain feature Tesla (MTSLA), Amazon (MAMZN), Google (MGOOGL) synthetic stocks and USD (UST).
On Elrond, synthetics will be issued and traded either as ESDT or NFT tokens.
Launchpad
Launchpad is an innovative form of IEO pioneered and popularized by the Binance crypto exchange. The recent success of platforms such as Polkastarter indicate a fundraising model that works well to bootstrap new ideas with community funding.
The Elrond launchpad will offer similar functionalities directly on the Elrond Network, and will benefit from the project’s large and loyal userbase.
NFT
Non-fungible tokens or NFTs are becoming a new trend in the cryptocurrency market. Essentially, NFTs are tokenized real and virtual assets that do not fall under the definition of classic commodities. These include virtual cards, art objects, intellectual property. Also, unlike other tokenized assets, unique items that are supplied in a single copy or in a limited edition act as the underlying NFT asset.
NFTs on Elrond are embedded straight into the protocol. This allows them to be attached to Elrond’s Smart Accounts (any account) for true ownership, which is different from other blockchains and can have significant implications for true ownership.
Conclusion
The Elrond DeFi 2.0 module will offer similar functionality as other existing DeFi products. The interesting fact is that they all come built by the Elrond teams. This can have important implications for the efficiency of their interoperability, security and performance.
Everstake is one of the largest staking providers for the Elrond ecosystem. Many of the blocks containing some of the most interesting DeFi transactions will be minted by our validator. We invite you to find out more about Elrond and stake your eGold tokens with Everstake.
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