The market value of DeFi rose by more than 600% in 8 weeks, but I still be worried about its future advancement...
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From an obscure "bad boy" to a "heavy man" in the blockchain industry, this sentence can not be used to describe the quick development of DeFi.
Since its inception in 2018, DeFi has exploded from a concept to an industry in just 2 yrs.
At the latest time of the entire year, more than 1 billion US dollars of funds were written into smart contracts.
From derivatives marketplaces to lending systems to insurance contracts, the financial solutions that were once bank franchise are being reshaped into dApps on the blockchain. They are trustless, transparent and decentralized.
DeFi may replace traditional financial solutions!
With the momentum of quick development, such calls are endless.
However, to truly replace traditional financial solutions and expand into the global financial landscape, LiquidApps believes that DeFi still faces many problems.
-01-
Blocking a fresh height
A brief analysis of the down sides faced by DeFi development /
The first problem facing the advancement of DeFi is trust:
In the traditional financial sector, customers have full confidence in transactions, and their transactions will undoubtedly be executed within an irreversible manner.
Because banking institutions, insurance firms and investment agents have fiduciary obligations to clients, if the deal isn't executed within the agreed period, they'll be held accountable.
If DeFi is usually to be add up to traditional finance, it must definitely provide execution finality and reliability much like traditional finance.
On the other hand, ensuring fluency is another challenge of DeFi:
In normal occasions, the network allocates assets efficiently, and the DeFi application experience is smooth.
But when the system is congested, system demand rises sharply while network capability is declining, leading to very high transaction costs and prolonged deal execution confirmation period.
In the example on March 12th and 13th of the year, the congestion of the Ethereum network was severe, which directly caused the network costs of Ethereum to reach 1.2 million Us all bucks in two times, and this figure was 6 times the annual average of 2020!
A lot of DeFi applications ceased operation consequently, causing heavy losses for some users.
In conclusion, although innovations in the DeFi industry continue steadily to impress individuals, DeFi have to grow into a reliable, decentralized, and efficient system in order to seize marketplace share beyond your blockchain industry.
-02-
Strike on the global financial landscape
DeFi must make an effort to break through these three limitations /
In case a Defi project not only really wants to be in line with the blockchain industry, but also wants to expand into the global financial scenery, it must have three key elements:
Important element one: real-time settlement
DeFi programs that wish to realize the key function of RTGS have to counter the inherent limitation of the underlying general public chain that blocks its growth path.
In traditional finance, the real-period gross settlement program (RTGS) identifies a financial information transfer process that can very clear each transaction between banks.
The RTGS system can achieve real-time settlement, thereby achieving predictable cash flow and real-time auditing.
DeFi programs that wish to realize the key function of RTGS have to counter the inherent limitation of the underlying general public chain that blocks its growth path.
A popular extension technique in many communities is to develop a two-layer transaction network on top of the underlying public chain, such as the Lightning Network on Bitcoin.
However, although the Lightning Network expanded the capacity of the Bitcoin blockchain, it sacrificed real-time on-chain settlement.
Customers of the Lightning Network can open transaction channels with each other, deposit initial balances, and continuously send funds between each other, but their dealings aren't broadcast to the entire chain, that will take time to process.
Only after the channel is closed, the parties will broadcast the initial and final balances to the entire blockchain network.
Important element two: high throughput
DeFi applications should be able to deal with a lot of transactions, even yet in congestion.
There's evidence that the congestion of the general public chain makes network resources very costly for dApps, causing many dApps' services to be temporarily interrupted.
Most DeFi programs are built about Ethereum, and they will be subject to gas fees and the option of the Ethereum blockchain itself.
Important element three: long-term storage
The more historical data a DeFi application can buy, the more accurate its risk management model will undoubtedly be.
It really is generally not recommended to shop too much non-essential data on the chain, because on-chain storage assets on both EOS and Ethereum are scarce.
However, if DeFi is to go additional and become an alternative solution to traditional financing, dApps need to double their storage capacity.
On the other hand, long-term storage is also conducive to danger management and pressure testing.
Banks, investment agents, and insurance firms use various technology to recognize risks and get corresponding methods to reduce them.
These technologies require the use of large amounts of historical data to simulate the past performance of assets and use these data to predict their upcoming performance.
The more historical data a DeFi application can buy, the more accurate its risk management model will undoubtedly be.
-03-
Three major restrictions of DeFi
Use DAPP system to achieve /
The DAPP network is an EOSIO-based side chain produced by LiquidApps, dedicated to solving the issues of blockchain advancement and bringing strong scalability to the advancement of blockchain.
We can work with a series of tools on the DAPP system to solve the issues facing the advancement of DeFi:
LiquidChains: Realize real-time settlement
LiquidChains is really a blockchain-as-a-service (BaaS) solution that allows one to launch the customized chain within a few minutes and connect it to the public system for open and transparent report keeping (if they choose to achieve this) if).
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On the DAPP network, even though the transaction volume and transaction swiftness increase exponentially, every transaction could be chained, retaining the advantages of the RTGS program on the blockchain.
In this manner, the DAPP network and traditional financing are indistinguishable in reliability and swiftness, and will operate steadily in a variety of economic environments.
DeFi applications may execute dealings on the high-volume, low-price LiquidChains, while regularly updating the status of the general public network.
Simply put, about the DAPP network, even though the deal volume and deal speed increase exponentially, every transaction could be stored about the chain, retaining the benefit of real-time settlement about the blockchain.
At the same time, by allowing dApps to perform on particular application chains and allowing them to choose to connect to the general public network, LiquidChains is among the most best general public/private chain solution for the project party.
LiquidOracles: Achieve high throughput
That's, the oracle functionality jogging on the DAPP system.
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DApps using LiquidOracles may refresh data more frequently, up to twice per minute, all in zero cost, while maintaining complete handle of the oracle databases.
This enables LiquidOracles to disregard the market conditions, unlike the Ethereum-based oracles which will be frozen when the network is congested.
Compared with other solutions, LiquidOracles has several benefits.
For the blockchain entrepreneurial team, the service degree agreement and data access privileges related agreements are directly written on the blockchain.
This enables the project party to easily verify the integrity of the info they receive and whether the services provided by the DSP meet up with the standards.
vRAM: for long-term storage
RAM is really a perfect option to achieve ultra-lower cost to improve storage capability without sacrificing swiftness and decentralization.
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The vRAM function of the DAPP network equips dApps with exponentially increased storage capacity without sacrificing speed and decentralization.
For example, running a Monte Carlo technique (a statistical simulation technique) requires a lot of memory, that involves multiple simulations later on to predict the achievable behavior of a secured asset and plan the worst.
-04-
With DAPP network
Help to witness DeFi highlights /
There is no doubt that our world needs DeFi.
The COVID-19 epidemic has once more exposed the inefficiency of lawful currency. Money printing devices are printing cash madly, big companies are once more on the verge of receiving assistance, and the number of unemployed worldwide is also rising sharply.
This crisis allowed people to see the role of decentralized agreements in the worldwide economy.
But what's even more unquestionable is that DeFi needs to grow.
In order for DeFi to reach the magnitude of traditional finance, the infrastructure built onto it must be robust, efficient, and reliable.
For DeFi to build a transparent, reasonable, and suitable economic climate for everyone, the scalability and interoperability features of the DAPP system must be injected into upcoming financial applications.
In this manner, DeFi applications can have the opportunity to withstand the congestion of the basic general public chain, and become more flexible and reliable in this technique.
If you agree with the worth of DeFi and want decentralized financing to promote the entire world to improve for the better, please add the LiquidApps China Community Manager, I will join the DAPP system!
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