Bridge Protocol and Decentralized Finance (DeFi) Join Forces
What is Decentralized Finance (DeFi)?
This is the buzz-word of 2020 in the cryptocurrency world, but there is some meat on the bone to this acronym. DeFi uses blockchain technology to further decentralize services that traditionally use intermediaries. The aim is to allow someone to use services that has not been able to gain access for numerous reasons and allow for greater transparency in transactions.
Things like wealth management, trading, trading, payment processing and insurances are all being built on top of a blockchain protocol.
Each service handles their own piece of the total puzzle, with incentives and fee structures that are competitive by design. Options in the Ethereum ecosystem for liquidity providers; Uniswap for example, allow ERC tokens many options for traders to stake and wrap tokens. Community users earn interest for wrapping/staking tokens, all done without a bank. Think of this as peer-to-peer lending and liquidity.
Where To Find DeFi Applications?
Nearly all DeFi projects are being built on Ethereum, making it the default blockchain for many dApps. Taking a look at the average data of November, Ethereum dominates existing blockchains in amount of applications, application activity, user activity and also in volume traded/locked (with limitations).
According to an article by Philipp Sandner, looking at the data shows the trend in November to reinforce this.
DeFi Benefits
A lot of the same value system that advocates of Bitcoin subscribe to, are also in place in the DeFi pro column. But what else:
- Censorship resistance and global market participation.
- Public ledgers that help with auditing.
- The user controls their keys, therefore controlling their information.
- A competitive market — a global market means better prices from more providers.
- No insurance necessary — no need to worry about a financial crisis or crash. Users controlling their keys to their funds in contracts ensure that their tokens are protected from other factors not in our control.
DeFi Risks and Flash Loans
The industry has suffered several high-profile hacks and attacks in 2019 and 2020, resulting in major losses.
Decentralized Finance (DeFi) protocol Value DeFi was exploited for approximately $6 million in November, possibly due to a flash loan attack, a scheme often seen in the fast-growing DeFi sector.
- Flash loans allow users to borrow funds without collateral because the lender expects the funds would be returned instantly.
- Accessibility is still relatively low, tools and user experiences aren’t refined much.
- No credit scoring or identity verification.
- Market manipulation by those who can control market pricing for a lot of tokens.
- Network congestion and fees on Ethereum can make a transaction costly in heavy-use times.
DeFi has many challenges due to the nature of blockchain and the anonymity it provides. This coupled with being in the nascent stages, developers must work to ensure interests are aligned.
Bridge helps DeFi Applications Offer Secure Identity Verification
Bridge Protocol has designed a unique way to verify know-your-customer (kyc) and anti-money-laundering (aml) using blockchain. Once verified, a user can seamlessly use Ethereum and NEO services that require identity verification. This allows a higher-standard in DeFi contracts by requiring kyc/aml and by that nature will reduce fraudsters participation. By verifying an identity to United States banking standards, DeFi loan platforms can be ensured they are compliant.
Bridge stands committed to DeFi as an important step in a global financial system. By providing liquidity in Uniswap and soon others, Bridge will ensure people can use their tokens to access more services both on and off of the Bridge Network.
