DeFi is being called the next big thing in the digital world today. But most people don’t have a clear idea about it. This is why we have decided to write on this topic and discuss what is DeFi and what are its functionalities.
DeFi stands for Decentralized Finance
DeFi or Decentralized Finance aims to redevelop the current financial system and reduce the number of middle men in it. It is a model that takes people away from the faulty centralized system and brings them to the dependable and transparent decentralized system. It allows people to execute traditional financial actions such as borrowing, lending, the buying and selling of securities, and structuring derivative products through an open-source, decentralized network.
The DDK is a perfect example of DeFi as DDK is not just a merchant payment with low fees, its more than that. It allows people to buy their everyday needs online but at the same time trade the currency for benefits. The more duration DDK stays in your crypto wallet, the more price increase you can expect. As the value increases you can buy even more products. Buying DDK is not just like converting one currency into another, it’s more like investing in something profitable and having the chance to spend your investment. You get complete freedom and nothing is locked.
Important functionalities of DeFi
It is said that stable coins are necessary for DeFi to perform in the market. This is because common cryptocurrencies such as Bitcoin are volatile, but a stable coin is pegged to valuable amount or fiat currency and that makes it less volatile. Experts believe that if we were to recreate lending contracts or other similar financial products in a volatile asset, it would be an impractical endeavor. This is the primary reason why most DeFi contracts use stable coins. Some of the common types of stable coins available in the market today are Paxos, USDT, Dai, TrueUSD, and USDC.
Here are some of the important functionalities of DeFi today.
Borrowing and Lending
DeFi allows people to easily take out a loan directly without waiting for an application review or having a bank account. There are DeFi applications out there where the borrower can take a loan without having to find a lender. Here, the smart contract is the lender, and an algorithm calculated the interest rates based on demand and supply. There are also some applications where a fixed interest rate is guaranteed, but that comes in exchange for loaning your digital coins to the contract.
DeFi also allows borrowers to stake their digital coins as collateral, just like the DDK Platform. These are locked within a smart contract and remain there until the loan is repaid. Sometimes the collateral requirements seem to be very high due to some reasons.
In most cases, the trading cryptocurrencies is done through third-party platforms. But in DeFi a machine seamlessly creates a fair exchange of crypto through a smart contract. This allows DeFi exchanges to eliminate middlemen and act as a keeper of digital assets in a (p2p) peer-to-peer exchange.
Asset Management Protocols
DeFi products can also develop frameworks where users can pool funds for investments. This is similar to asset aggregators, automated funds, and Robo advisors.
Call it decentralized betting or predictions and options, it will just be the same. This category, in essence, is about betting or guessing that something will happen or not in the future. It includes on-chain options, decentralized prediction markets, and insurance in a completely automated matter. Currently, these platforms are used on digital assets but experts believe that the future will see these being utilized on insurance against natural disasters and accidents.
The most popular Synthetic Asset Bridges
In Synthetic asset bridges, assets such as Bitcoins are given digital representation and allowed to be used in financial contracts. This boosts the usability of cryptocurrencies and increases their acceptance everywhere.
These were the functionalities of DeFi and they all have been incorporated very intelligently in DDK Core 2.1
DDK Core 2.1
The DDK Platform will launch DDK Blockchain 2.1 that is commonly being referred to as DDK Core 2.1. It has a new payment address and comes with improved Key and Cryptographic Signatures. It’s powered by ECDSA Algorithm, and has built-in smart contracts. Its Native assets include Token Issuance/DAI and offers multi-signatures capabilities along with hierarchical deterministic (HD) wallets that are powered by multiple-thread CPUs. Its enhanced network capabilities are supplemented with on-chain referrals.
We hope this article was beneficial for you and you learned something new today.
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