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Opportunities that Elrond opens up for DeFi

Elrond has developed a scalable, fast, and secure blockchain platform for decentralized applications with smart contracts. Elrond’s mission is to train and help its community better understand the principles of the project. The platform achieves high performance through sharding and uses the Secure Proof-of-Stake (SPoS) consensus mechanism.

Read our article, where we wrote what Elrond is and how It works.

Elrond recently announced a collaboration with ZeroSwap, a multi-chain protocol and Dex liquidity aggregator. ZeroSwap integrates its solution with the Elrond blockchain to provide zero-fee transactions for DeFi products. In addition, this collaboration will provide eGLD token holders with access to a wide range of DeFi products. And in this article we will talk about the opportunities that Elrond opens up for the DeFi ecosystem.

ESDT token

The Elrond Protocol allows users to issue their own ESDT tokens. The platform has developed the Elrond Standard Digital Token, which allows users to transfer tokens using proprietary cast & speed protocol. This means that user tokens will be as fast and scalable as EGLD.

Users can issue and store tokens directly in Elrond smart accounts (see below). This means that the same functionality is available for smart contracts and regular users.

Custom protocols will use the same mechanisms as the original Elrond, including sharding. The fee will be only $1 for 1000 transactions in stablecoins.

Elrond tokens digital model is used by Binance for the $BUSD stablecoin. Based on the platform’s innovations, Binance develops new DeFi use cases using:

  • Programmable keystore values;
  • Processing debit and credit transactions;
  • Distribution of 30% of gas between SCs creators.

Elrond accounts contain not only addresses and their balances, but also an individual data tree that allows users to store key values. Users can link a Bitcoin address, email, social networks, IBAN, and so on to their smart account.

Elrond users can directly link tokens to their accounts. In other words, tokens are directly linked to an account in Elrond, and not to a third-party smart contract that reserves a certain number of tokens for a specific address.

This means that users will not have to send requests to the smart contract and spend gas. As mentioned earlier, the cost of 1000 transactions on the Elrond blockchain is equivalent to $1.

This naming system allows users to use simple addresses, such as @Everstake, instead of complex and long character combinations. Such addresses are easy to remember and enter to quickly send tokens to another person or delegate them to a validator.

Elrond VM uses Web Assembly (WASM) — an open standard for creating applications in low-level languages. Arwen WASM allows developers to directly access and interact with the processor architecture to create efficient and productive applications in languages such as C, C++, C#, Rust, Go, and others.

Web Assembly was not originally intended to be used for developing blockchain applications, but it has all the necessary tools for this, which makes it universal. Thanks to WASM, Elrond blockchain processes are processed 25 times faster than Ethereum (EVM) ones and 50 times faster than Polkadot ones.

Arwen WASM advantages

  • Ability to create simple, portable, and testable smart contracts;
  • Modularity — developers can create independent program components and reuse the code;
  • Advanced tools for debugging applications;
  • Available APIs with detailed documentation;
  • Security and protection against system failure.

Unique architecture makes Arwen WASM one of the most productive virtual machines for developing blockchain platforms. Let’s have on the architecture of the VM that is used by Elrond.

Devtools can be used by ordinary developers who don’t have access to expensive blockchain development tools. For them, the platform provides WebAssembly (WASM) tools and many programming languages, such as C, C++, Rust, Go, and many others. To facilitate development, programmers can use proprietary Elrond IDE.

Note. The Elrond team recommends using Rust, since this programming language allows developers to create clean and efficient code for smart contracts.

In addition, the Elrond network enables direct migrations of smart contracts in Solidity from the Ethereum blockchain. so DeFi developers don’t have to start protocol development from scratch. But the Elrond team has not yet prepared instructions on how to do this. Stay tuned for updates on their website in the documentation section.

The Elrond blockchain is based on the Secure Proof-of-Stake (SPoS) mechanism. The protocol randomly selects validators, but this process is affected by the volume of EGLD tokens staked and the node rating. In other words, not only the stake volume is crucial for validators selection, but the higher the node rating is, the higher is the possibility that the smart contract will pick this node as the validator for the next block.

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30% of the gas used in smart contract is returned as royalties the smart contract developer.

The Elrond architecture is based on Adaptive State Sharding at all levels. This ensures shards merging and separation and makes the blockchain adaptive. For example, there is no need to maintain a large space for the transaction if multiple validators are not active at the moment.

The protocol architecture allows balancing smart contracts between blockchains and running multiple SCs in parallel, providing cross-shard transactions. The Elrond blockchain consists of 6 shards and a metachain.

The Elrond blockchain uses an asynchronous transaction model. It works as follows:

  • First, the transaction is processed in the sender’s shard;
  • Then it is confirmed by the metachain;
  • Finally, the transaction is finalized in the recipient shard.

This makes smart contracts adaptive and portable.

Everstake supports Elrond and has launched its own validator from the very launch of the project. EGLD holders (and others) will be able to stake their tokens and receive up to 36% per annum during the 4th staking phase, which will start in about 4 weeks. For now, EGLD tokens can only be staked in the original Elrond wallet.

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