Have you ever heard about DeFi before? DeFi assets in the crypto space, or just new hype? No matter if you’ve never heard about DeFi before, or you want to make sure you understand it right?
DeFi relies heavily on cryptography, blockchain and smart contracts. Smart contracts are the main building blocks on DeFi. Besides that, ethereum has the most developed ecosystem across all the smart contract platforms, with 1000s of developers building new applications every day, and the most value locked in smart contracts, which create an additional network effect. In fact, all the DeFi protocols mentioned in this video are built on ethereum. Now, let’s see how it all started. One of the first projects that started the decentralised finance movement was maker down, maker founded in 2015 allows user to lock in collateral such ease and generate dye, a stable coin, that by using certain incentives follows the price of US dollar die can be also used for saving on makers platform. This recreates one of the pillars of the financial system, lending and borrowing. In fact, DeFi is trying to create the whole new financial ecosystem in permission less and open way. Lending and borrowing is only one part of this ecosystem. Some of the other important parts are stable coins, decentralised exchanges, derivatives, margin, trading, and insurance. Let’s talk about each of the categories one by one. Besides maker down that we just mentioned, there are a few other important defy projects in this category. The main one is compound. At the time of creating this video is the biggest defy project in the lending category with around $630 million worth of assets locked in the protocol.
The main problem with them is the fact that they’re centralised as there is a company behind them that is responsible for holding the equivalent of the value of stable coins in US dollar or other assets. Nevertheless, the stable coins and assets gained a lot of popularity and are extensively used in DeFi applications like compound or other decentralised exchanges. In opposite to standard centralised crypto exchanges allow for exchanging crypto assets in a completely this centralised and permission less way without giving up the custody of the coins.
DeFi assets and platforms
A few examples of the liquidity pool based ones are Uniswap, Khyber balancer, and banker. Loop ring and idax are examples of the order book based ones. Similarly to traditional finance, derivatives are contracts that derive their value from the performance of an underlying asset. The main DeFi apps in the margin trading space are fulcrum. Insurance is yet another part of traditional finance that can be reproduced in decentralised finance. It provides certain guarantees of compensation in return for a payment of a premium. One of the most popular applications of insurance in the defy space is protection against smart contract failures, and protection of deposits. The most popular DeFi projects in this space are Nexus mutual, and open. Another really important although not strictly limited to finance, part of the DeFi ecosystem are Oracle services that focus on delivering reliable data feeds from the outside world into the smart contracts. The most popular project in this space is chain link. These are pretty much all the main parts of the DeFi ecosystem. They can also be combined together in multiple various ways. We can think about them as money as more complicated defy projects can be built on top of the existing blocks. Let’s compare the main differences between DeFi. That’s termed for centralised or traditional finance. But before we do that, if you already made it that far, don’t forget to smash the like button to help this channel grow. defy permission less no KYC permission KYC sanctions defy open, open source encouraging free collaboration, DeFi Close, close source decisions made behind closed doors defy censorship resistant DeFi can be censored, defy cheaper, mostly networks, these DeFi, expensive intermediaries charging hefty fees defy build on the blockchain, DeFi built on all foundations. Before we wrap up this video, we have to also mention the potential risks associated with DeFi. This is also when users can take additional insurance to lower the risk of potential issues.
Liberthereum platform and role in DeFi
Liberthereum has entered the crypto space and attracted a lot of peoples’ attention in the market that were looking for a platform like Liberthereum long time ago. The platform will assist them to sell, stake and buy the properties, assets with complete safety. Currently, most of the financial products can be only created by banks DeFi is open permission less and enables cooperative work in a similar way to the internet. Although DeFi is currently built predominantly on Libthereum. With more adoption of interoperability protocols, we may see more projects being built on different chains in the future.