DeFi (Decentralized Finance) is sliding into our life and replacing the traditional technologies of the current financial system with open-source protocols, blockchain, and smart contracts. The exclusion of intermediaries from all types of transactions is one of the major advantages of DeFi; smart contracts are used to enforce the terms of each transaction.
Hashbon - crypto payment ecosystem is powered by both DeFi and CeFi products.
DeFi (Decentralized Finance) is sliding into our life and replacing the traditional technologies of the current financial system with open-source protocols, blockchain, and smart contracts.
The exclusion of intermediaries from all types of transactions is one of the major advantages of DeFi; smart contracts are used to enforce the terms of each transaction.
Most of the existing DeFi projects are built on the Ethereum blockchain still, and the number of new applications in the field of decentralized finance is steadily growing.
The DeFi ecosystem consists of a mix of open-source technologies, blockchain, and proprietary software. Depending on the specific platform, the set of applications may vary. Any Internet user can interact with the ecosystem and manage assets through peer-to-peer (P2P) and decentralized applications (dApps).
To dive deeper into DeFi sea, you should learn a few keywords – we have gathered a short glossary for intro to decentralized finance in crypto:· Blockchain bridge: provides interoperability between Bitcoin and Ethereum (or other blockchains). This interoperability can include the transfer of tokens, data, and even smart-contract instructions between independent platforms.
- Composability: an open-source application, allowing dApps to be used to "compose" new applications with code as building blocks.
- Decentralized Exchanges (DEX): an online exchange where users exchange currencies for other currencies. This exchange connects users directly, without intermediaries.
- Extraction of liquidity: providing free tokens to users of bounty campaigns.
- Forecasting markets: markets for betting on the outcome of future events without intermediaries.
- Involvement of oracles and arbitrators: the oracle acts as a third party to the multi-signature contract, and when it finally transmits the correct public key for a particular combination, the transaction is initiated. Arbitrators sign a contract with a lender to transfer bitcoin from its current location to an atomic swap contract.
- Lending platforms: these platforms use smart contracts to replace intermediaries, such as banks that manage lending in the middle.
- Money legos: it can link DeFi applications to each other to create new financial products.
- Stablecoin: a cryptocurrency pegged to an asset outside the cryptocurrency to stabilize the price.
- Smart contract: an agreement concluded between two or more parties, as a result of which, when certain conditions meet, certain actions take place. When a previously programmed condition is activated, the smart contract automatically executes the corresponding agreement.
- Yield farming: users browse various DeFi tokens looking for opportunities to generate more profit.
- Wrapped Bitcoin (WBTC): a method of sending Bitcoin to the Ethereum network to use Bitcoin in the DeFi Ethereum system, allowing users to earn interest on the sale of bitcoins by lending them through decentralized lending platforms.
DeFi functionality is almost limitless; it embodies all the trends of the future financial system.
In this article, we are going to consider two components DEX and Bridge, in more detail as there is a rising demand for blockchain interoperability in the cryptocurrency market. Let’s look closer at what the difference is and why they are important.
A Decentralized Exchange (DEX) is a site or application where the purchase, sale, or exchange of cryptocurrency and tokens listed on this exchange are carried out directly between participants. Decentralized exchanges are managed automatically or semi-automatically with the involvement of platform participants in the process of making important decisions.
Such platforms provide the technical possibility of direct interaction between participants and use a distributed ledger (blockchain) to store and process all (or almost all) of the data. The most popular DEXs are Uniswap or Pancakeswap.
- Provides complete anonymity of the user, also does not store user assets, thereby excluding hacker attacks.
- Lack of a single control center, there is no management that could be interested in price manipulation within the exchange.
- Authorities cannot end the exchange due to the distributed architecture.
- To make a purchase without the participation of third parties, participants use smart contracts.
- Some types of DEX allow users to create their own tokens and exchange them with other users. DEXs allow people to own tokens for Decentralized Finance (DeFi), services that allow them to store, borrow, lend, or trade without going to a bank or other financial institution.
- Low trading fees.
- DEX exchanges can differ in the peg's degree to a particular currency and the range of currencies that can be traded on a given site. It depends on the blockchain on which one or another decentralized cryptocurrency exchange is built.
- There are neutral exchanges that provide users with more freedom, allowing them to make secure transactions with various digital assets in their decentralized trading system.
A Cross-Chain Decentralized Exchange (CDEX) is a site or application that supports cross-chain transaction protocols (e.g., BSC and ETH) and cross-chain token swaps in a DeFi manner.
The exchange combines the various advantages of different public chains and creates a very well-rounded and composite ecosystem. Currently, there is a single CDEX on the market – Hashbon Rocket.
- Swap any ERC-20 token for any BEP-20 one and vice versa in the DeFi manner.
- Decentralized cross-chain protocol.
- Friendly user experience.
- Distributed memory matching engine.
- Liquidity sharing mechanism between Exchanges.
- Easily-scaling layer 2 network architecture.
- Staking third-party tokens.
- Arbiters provide the system with security and transparency; token purchase receives verification of the validity of the transaction, excluding any errors.
- Oracles launch various algorithmically tokenized assets.
A Blockchain bridge is a connection that allows the transfer of tokens and/or arbitrary between vastly different networks, such as Bitcoin and Ethereum, and between one parent blockchain and its child chain, called a sidechain, which either operates under different consensus rules or inherits its security from the parent blockchain.
Both chains can have different protocols, rules, and governance models, but the bridge provides a compatible way to interoperate securely on both sides.
- Cross-chain collateral: bridges allow users to transfer digital assets from Bitcoin to Ethereum. Also, they run decentralized applications on multiple platforms.
- Scalability: bridges provide greater scalability due to the transaction volumes without forcing developers and users to abandon the liquidity and network effect of the original chains.
- Efficiency: users can make and receive micro transfers without high transaction fees with tokens hosted on less scalable chains.
- Substrate-native chains are built by bridge pallets.
- Smart contracts - If the chain is not on Substrate, you should have smart contracts on the non-Substrate chain to bridge (e.g., Ethereum mainnet will have a bridge smart contract that initiates Eth transactions based on incoming XCMP messages).
Every new bridge issues a new so-called pegged token for your project. If you already have a token issued on BSC, you can’t use bridges.
In CDEX, you can exchange any ERC-20 for any BEP-20 tokens.
The market is witnessing a huge demand for token and coin swapping; that’s why we dedicated this article to the most popular tools on how to exchange them seamlessly and safely.
One of the newly born solutions, Hashbon Rocket CDEX, is definitely worth considering. While Uniswap allows changing one ERC-20 token to another ERC-20 token, Hashbon Rocket allows changing any ERC-20 token to any BEP-20 token.
Thus, a true decentralized cross-chain exchange was implemented. At the moment, Hashbon MVP supports the exchange between ERC-20 and BEP-20 tokens, but it is planned to add all EVM-compatible blockchains, including Ethereum Classic, Matic, Fantom, Huobi Eco, xDai, etc. HASH Token is the fuel for the Hashbon Rocket; with its help, various system participants will be able to use different services.
Being a true decentralized cross-chain exchange platform, Hashbon Rocket is governed by a fully decentralized network of arbiters (HASH holders) where users will face a 6-step algorithm: Offer, Order, Payment, Marking an order as paid, Order and Payment data, Votes.
A simple guide on how to use Hashbon Rocket is here.