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DeFiChain's hard fork makes decentralized assets lucrative for millions of people

 


With the latest update, DeFiChain now supports decentralized loans and assets. The DeFi protocol intends 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 on the ecosystem of the mother of all crypto currencies. Now the DeFi protocol went live on November 15th with the new Fort Canning update .

While asset tokens are not new territory for many crypto enthusiasts, DeFiChain can show some differences to conventional providers. While these set up the asset token feature as a dApp on the blockchain, the applications on the DeFiChain are natively anchored at the level of the consensus mechanism. DeFiChain therefore works completely without smart contracts or a virtual machine to implement DeFi applications. This reduces the smart contract risk - the risk of decentralized systems being tricked - 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 in order to reduce the attack surface. DeFiChain has its own decentralized exchange, offers its users the opportunity to operate liquidity mining and staking and, with the latest update, opens the doors to the world of decentralized assets and loans.

Stock trading in the crypto age

The implementation of decentralized assets offers the opportunity to democratize traditional trading in securities. This enables anyone with Internet access to invest in synthetic assets in a completely decentralized manner. Requirements such as a bank account or access to a broker are no longer applicable.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 linked to the value of the “real” asset. This kind of replication of an asset is also referred to as synthetic it asset . Ultimately, users invest in a kind of copy of the asset and thus do not acquire any direct stakes in the respective company. As a result, however, the tokens are not regarded as securities and are tax-free in many countries after a one-year holding period.

U-Zyn Chua, DeFiChain Co-Founder, announced that the hard fork enables “one of the most significant use cases in smart contract-less DeFi: decentralized tokenization and decentralized loans”. He also stated that this means that “for the first time, crypto users can tokenize assets using BTC and DFI (DeFiChains native token) without a central party”. This has the advantage that users can “generate cash flow and hold long positions in cryptocurrencies” at the same time.

How do you generate cash flow with decentralized assets?

So that decentralized trading with tokens is even possible, a so-called liquidity pool is required. This enables indirect trading of various assets, in which the users trade with the respective pool and not directly with one another. Such a pool always contains the currency pairs required for a trade. For example, you could pay a stablecoin like dUSD (DeFiChain's decentralized dollar stablecoin) into a pool and take out a Tesla stock token in return.

So-called liquidity mining is used to ensure a certain level of liquidity in a pool. The users are responsible for ensuring the required trading liquidity in a pool.

The liquidity in the pool acts as a middleman for the 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. In contrast to traditional share trading, customers benefit not only from the price gain, 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 price gains. Even in regions where bank accounts are not the norm in society, decentralized loans and assets offer enormous potential. 


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