Building The Future of Cross-Fi

Nikolaos Kostopoulos
Nov 9 · 6 min read

Harmony has committed significant resources and research bandwidth the development of a DeFi ecosystem!

Decentralization is a powerful instrument for economic growth, and our support is expected to bring governance closer to the access of end costumers - contributing to economic development of digital currencies ecosystem and the reduction of fees collected by third parties.

Recently, we have published our research towards setting the foundations for the DEFI economy and argued why Harmony’s infrastructure is designed to support technically, but also as an ecosystem the flourishing and fast-growing DeFi d-applications.

Today, we present our ambitious plan to move a step forward — introducing Harmony’s Cross-Fi plans!

We have partnered with Waves Financial — an early-stage investment, asset management, and treasury management boutique consultancy firm to further the growth of the digital asset ecosystem.

Among the first deliverables of our partnership if the Harmony DeFi and Cross-Fi report interpreting the insights and the impact of the DeFi economy, and exploring the domains Harmony’s infrastructure could support further the growth of the DeFi economy!

This post is a summary with abstracts retrieved from the published report which is available for download here: harmony.one/crossfi

Building The Future of Cross-Fi

Permissionless: Anyone is able to access decentralized financial networks through an internet connection. No individual can be denied service based on who they are, where they were born, or how much money they have

Trustless: Users don’t have to trust a central party to ensure that transactions are valid

Programmable: Developers can create and intertwine financial services at a very low cost. Plug and play architecture helps compound the power of these services Transparent: Public blockchains are transparent and auditable. They retain best of both worlds: information on financial exchanges are available while privacy can be preserved

Censorship Resistant: No central party is able to reverse the order of transactions and deem a validated transaction invalid at some later point in time. Similarly, a central party can’t turn off the service and anyone with access can use the network

Among the most popular DeFi cases include:

Lending: Borrowing/Lending on a public blockchain with much less friction vs. traditional platforms.

Derivatives/Assets: Synthetic assets which are derivatives of other assets allows exposure without having the actual asset.

Decentralized Exchanges: Traders can trade on platforms that do not hold their funds custody

Payment solutions: Traditionally centralized payment solutions can be decentralized to be as effective while staying censorship-free

Stablecoin implementations:

  1. Traditional Collateral-backed
  2. 2. Crypto Collateral-backed
  3. 3. Hybrid / Algorithmic Traditional Collateral stablecoins include Tether (88% of the total stablecoin market share) and USDC (4.4%) MakerDAO’s

Dai is the most prominent crypto collateralized stablecoin, with a market cap of ~$86M

Decentralized Oracles

Oracles provide smart contracts with data from the Oracle Services outside world (i.e. the price of ETH to trigger a liquidation if collateralization drops below requirements) Current approaches to ensure validity of oracles include: ● Multiple data sources ○ Safer, but more expensive

● Multiple oracles ○ Reduces probability of collusion

● Financial incentives / penalties ○ Earn rewards for performing honest work, but penalize if they misbehave

There is no one-size-fits-all solution as dApps require different guarantees based on their specific use cases, with the trade-off being safety vs. cost.

Decentralized exchanges operate without a central authority or middlemen, allowing users to transact peer-to-peer with little risk of censorship

While DEXs historically suffer from price discrepancies across exchanges, the increasing popularity of DEX aggregating tools has tightened the spread across these exchanges
● Protocol for automated token swapping on Ethereum

● ETH and ERC20 tokens are pooled in reserves, and the ratio of these assets determines the exchange rate

● Decentralized ERC20 exchange with token for staking

● Similar to centralized alternatives, but trades are settled on-chain

● Protocol for peer-to-peer asset exchange on Ethereum

● Native ZRX token used for governance and fees

● Offers tools for other DEXs to implement

Challenges Beyond DeFi: Cross-Fi

Scalability / high gas costs

Multiple scalability solutions coming to market will enable more gas-intensive use cases

Lack of identity / credit scores leading to over-collateralization requirements

Smart contract / technical risk (and lack of insurance)

Multiple approaches to mitigate technical risk and improve smart contract security:

Availability of fiat on / off ramps

Increasing competition should lead to fee compression

Friction around UX / UI

“Over 90% of users who try to use a dApp will give up when told they need to download Metamask”

Lack of Financial Privacy & Auditability

Harmony’s contribution to DeFi & Cross-Fi

Harmony’s contribution to DeFi & Cross-Fi

Decentralized market makers via Hummingbot

Developer Tooling

Harmony Protocol harmony.one/github

API’s harmony.one/api

SDK harmony.one/sdk

Testnet harmony.one/testnet

Smart Contracts harmony.one/h2o

Randomness vs. Fairness

Current challenges within cross-border payments

Harmony’s Cross-Fi Solutions Roadmap

Help us build the future of Cross-Fi!

Let us know your thoughts with the HashTag #DeFi and Tag the Official Harmony Twitter account!

Harmony

To scale trust for billions of people and create a radically fair economy

Nikolaos Kostopoulos

Written by

Advising governments & interest groups on cryptocurrency & FinTech regulation in the European Union.

Harmony

Harmony

To scale trust for billions of people and create a radically fair economy

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