Future Prospects of Dash Platform and DeFi Together
2020 was the year of DeFi as the ecosystem became a multi-billion dollar space. This increased attention and liquidity also brought unprecedented utility to the underlying layer-1 chains. While the “DeFi hype” may have gone down, there is no denying the innovativeness of this space. The Dash Platform will allow Dash to tap into DeFi and benefit from this burgeoning ecosystem.
What is DeFi?
DeFi (or decentralized finance) is a crypto sector that offers sophisticated financial instruments without relying on an intermediary. Centralized Finance (CeFi) offerings are governed by institutions like banks and brokerages. In other words, these centralized institutions have the final say in deciding who can access these instruments. DeFi flips this equation by removing these centralized overseers. Instead, all the rules governing the system are stated and enforced via smart contracts. Smart contracts are automated agreements defined by code.
The metric used to judge the value of this ecosystem is “TVL,” or total value locked. TVL measures the amount of money locked up in the various DeFi protocols.
The Rise of DeFi
While projects like MakerDAO and Bancor were the OG DeFi projects, 2020 and the so-called “Summer of DeFi ‘’ was what brought this space into the limelight. From January 2020 to January 2021, the DeFi space exploded from $600 million to $170 billion! That’s a 28233.33% rise in TVL. Projects like Curve Finance, Uniswap, Aave, Compound, and Lido became extremely popular and attracted billions of dollars from users worldwide. Following this, the market slumped as the rest of the crypto market crashed. However, the current DeFi TVL stands at a very healthy $48.55 billion.
Why did DeFi attract so much attention?
- Yield farming: DeFi allowed users to earn a yield on their tokens. Instead of your tokens lying in your wallet, why not put them to work and earn yield?
- Composability: One of the most exciting features of DeFi is composability, meaning the protocols are interoperable and are often described as “lego blocks.” Users can “stack yield” by staking their LP tokens — aka tokens, you get when you provide liquidity to a pool.
- Access: By definition, DeFi is open and public. Anyone with a crypto wallet and an internet connection can access a DeFi platform.
- Decentralized: Most of the DeFi protocols are governed by a DAO. The token holders are responsible for protocol governance.
DeFi platforms popularity
DeFi protocols have gotten incredible user traction over time. The total number of DeFi users has crossed 7 million. Interestingly, while it took 749 days for DeFi apps to reach 1 million users from 0, it just took 186 days for it to jump from 6 million to 7 million.
Up next, let’s look at unique monthly users. As you can see, DeFi mania hit its peak on May 2021 when the total number of DeFi users crossed 1 million. While the number of unique users has decreased, we are seeing an uptrend over the last few months.
Finally, let’s look at the most popular DeFi apps. A few things to note here:
- Uniswap is the most popular DeFi app by far, with total users nearing 5 million. Uniswap is a decentralized exchange (DEX) and has also done more than $1T in volume. As per the chart, Uniswap is the only app with more than a million users.
- 1inch is another DEX and has a little over 800,000 users.
- Only 11 DeFi apps have more than 100,000 users. Does this indicate that we are still very early in this industry?
Dash’s Current DeFi Credentials
Dash already has a self-funded treasury and was one of the first protocols to be self-governed by a DAO or Decentralized Autonomous Organization. As you may know, being DAO-governed is one of the most fundamental tenets of DeFi. Additionally, Dash is about to be integrated into the THORChain DEX and Maya Protocol in the near future. Stay tuned for further updates.
In a nutshell, Dash already has a slight presence in DeFi. However, the Dash Platform could be a game changer in this regard.
Building DeFi on Dash Platform
Dash Platform is a web3 tech stack that allows developers to create DeFi protocols. The Dash Platform has two components — Drive and DAPI.
Drive
The storage component of Dash Platform stores application data in Dash masternodes. This is how data storage works:
- The application creator defines the data structures of the application by creating a data contract.
- All user-created data is validated and verified against the corresponding data contract.
- Post validation, the application data is stored in Drive on the masternode network.
Dash’s consensus algorithm secures all the data stored in the Dash network.
DAPI — Decentralized API
Allows developers to connect their apps with the Dash blockchain. Developers can connect to DAPI directly or use a client library. DAPI helps developers by:
- Runnings nodes for developers. Think of it as a decentralized Infura.
- Removing overall cost and maintenance overhead.
Potential composability with the Cosmos ecosystem
Cross-chain functionality can be very useful for both users and protocol creators.
- Users can stake their LP tokens in multiple chains.
- Protocol creators can access liquidity in multiple chains.
So, how can Dash Platform potentially ensure cross-chain functionality?
Dash Platform uses the Tenderdash consensus algorithm, which is a variation of a Tendermint Core. Any blockchain network that uses Tendermint Core can use IBC, or “Inter-Blockchain Communication.” IBC is an innovative way blockchains can natively send data to each other. IBC creates dedicated channels that transmit data packets to communicate with each other.
Since the Cosmos ecosystem is built on Tendermint Core, it could open up the doors for potential cross-chain interoperability with Dash Platform.
NOTE: Dash and Cosmos aren’t currently compatible. However, their shared codebase origins provide a good starting point to streamline future IBC integration between them.
Closing Thoughts
DeFi has been the key for various layer-1 blockchains to access tremendous amounts of liquidity. Dash Platform allows developers to create DeFi apps on top of Dash Core. Will this be a game-changer for Dash’s utility?
