8 Core Pillars and Trends of DeFi with Helios Staking and Injective

While a lot of building has taken place over the last year in our beloved Web 3.0 industry, there is no denying that the past year has also been a tumultuous time in the cryptocurrency space. Yes, the year 2023 has highlighted something else among doom scrolling and sleep deprivation for even the most disciplined, heads-down devs. There is a dire need for decentralized finance to return to the principles upon which it was founded: trustlessness and transparency. Now is the best time to turn to DeFi (decentralized finance).

To break down the potential that DeFi offers, Helios Staking released a thread last month right in the eye of this year’s shit storm, which this blog post elucidates.

First and foremost, DeFi is a movement within the cryptocurrency space that aims to use blockchain technology to create a more open, transparent, and decentralized financial system. In this post, we delve into the DeFi Layer-1 blockchain Injective (https://injective.com) and how it fits into the larger DeFi ecosystem while also exploring the principles and pillars that position DeFi as the future of finance.

One of the top DeFi blockchains is Injective, which Helios has been partnered with since the beginning. We joined the Injective ecosystem as part of the Equinox Staking Validators. Additionally, we’re grateful to have won several awards through Injective.

In this article, we’ll first discuss what DeFi is. Next we will go through a deep dive into Injective, including what they’ve been up to this year and how they can help take DeFi to a new height.

Table of Contents

• What is DeFi?
• DeFi vs. Traditional Finance
• What it Will Take for DeFi to Go Mainstream
• Trustless and Transparent
• Business Interactions go to smart contracts. In the contract, there are specific terms and conditions. If this/ then statements.
• Fees are low and speeds are fast in DeFi, making the current financial system status quo comparatively archaic
• Yields and interest rates become competitive between protocols. Each protocol competes for high rewards and sustainable ecosystems
• Inclusivity — DeFi is permissionless, meaning no central body regulates participation. This provides equitable access to global infrastructure and its opportunities to all without prejudice
• Risks involved: smart contract vulnerabilities, oracle inefficiencies, self-custody risks, scaling problems
• Not your keys, not your crypto
• Governments, institutions, and Centralized exchanges jostle for position and power in the emerging space
• Self-Custody in Decentralized Finance Turns People Into Their Own Bank
• What is Injective?
• 2022 in Review for Injective
• In Conclusion

What is DeFi?

Before we dive head first into the pillars, let’s briefly discuss decentralized finance, especially how it differs from traditional finance.

DeFi is a movement within the cryptocurrency space that aims to use blockchain technology to create a more open, transparent, and decentralized financial system. DeFi projects focus on building decentralized applications (dApps) that enable users to interact with financial products and services in a trustless and transparent manner, usually with low fees, especially compared to traditional finance.

Some of the key features of DeFi projects include the use of the following:

• Smart contracts
• Decentralized exchanges (DEXs)
• The ability to access financial services without intermediaries or strict know-your-customer (KYC) and anti-money laundering (AML) regulations.

One of the main goals of DeFi is to create a financial system that is accessible to everyone, regardless of their location or financial status. This is particularly important in developing countries with limited access to traditional financial services. DeFi projects have the potential to provide financial services to those who may not otherwise have access to those services, helping to bridge the financial divide.

DeFi vs. Traditional Finance

By nature, DeFi is decentralized and transparent. In theory, this means that there is no single point of failure and that transactions can be easily audited. DeFi also utilizes smart contracts, which are self-executing contracts with the terms of the agreement written into code. These smart contracts help to automate processes and reduce the risk of fraud or errors.

DeFi is generally open-source, meaning the code is available for anyone to review and audit. This helps to improve the security and transparency of the system. Overall, the decentralized nature of DeFi, combined with the use of smart contracts and open-source technology, may make it a safer option than traditional finance.

These points were elucidated in a recent Coindesk interview featuring Injective.

What it Will Take for DeFi to Go Mainstream

Eric Chen, CEO and co-founder of Injective Labs, believes that DeFi is gaining traction with everyday users and institutions. He thinks that the next stage of DeFi evolution will involve embedding Web3-powered products into everyday applications, such as mainstream apps or websites with fiat on-ramps but governed by smart contracts on the backend. Yet, Chen argues it is necessary to reach a wider audience and make DeFi more accessible to people who may not be familiar with crypto-native products.

The Injective community is focusing on this goal by launching apps on top of Injective, such as the premier decentralized crypto exchange Helix, which aims to onboard everyday users and institutions new to crypto.

DeFi needs to address issues such as scalability, liquidity, and gas fees before it can serve more users, according to Chen. Additionally, Chen said that the entire DeFi industry is working on building infrastructures to address these problems but added that the participation of traditional finance entities might drive adoption.

“With many traditional institutions joining the space, DeFi will gradually reach mass adoption,” he said.

Chen also highlighted the role of permissioned DeFi, which combines decentralization with centralized mechanisms such as whitelisting, in making traditional institutions more comfortable with DeFi. Chen believes that DeFi is easier to regulate than legacy financial infrastructure because it is designed to provide decentralized, secure, and transparent financial services.

1) Trustless and Transparent

DeFi requires trust in code, and that code is transparent to everyone. By design, anyone should be able to audit and verify code in DeFi. Trust no longer becomes an issue in a sole entity. In traditional finance, trust is often established through intermediaries such as banks and financial institutions. However, in DeFi, trust is established through code, which is open and transparent for anyone to see and verify.

One key aspect of DeFi is smart contracts, which are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein are stored and replicated on a blockchain network, which makes the code transparent and tamper-proof (the next section explains smart contracts in more detail).

Overall, DeFi makes trust no longer an issue by using transparent and open code to establish trust rather than relying on intermediaries. This helps to create a more decentralized and secure financial system.

2) Business Interactions go to smart contracts. In the contract, there are specific terms and conditions (e.g., this/ then statements)

A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein are stored and replicated on a blockchain network.

Smart contracts can benefit a regular business contract in several ways:

1. Automation: Smart contracts can automatically execute the contract terms when certain predefined conditions are met, eliminating the need for manual processing and reducing the risk of errors.
2. Cost savings: Smart contracts can reduce the need for intermediaries, such as lawyers and banks, which can lower the overall cost of the contract.
3. Improved efficiency: Smart contracts can streamline the contract process and make it faster and more efficient by eliminating the need for manual processing and documentation.
4. Increased security: Smart contracts are stored on a blockchain, which makes them secure and tamper-proof. This can reduce the risk of fraud and ensure that the contract terms are accurately recorded and executed.
5. Increased transparency: Smart contracts provide a clear and transparent record of the terms of the contract, which can help to build trust between the parties involved.

Using smart contracts can help businesses streamline their operations, reduce costs, and increase the efficiency and security of their contracts. For example, smart contracts could improve how many professional athletes make their contracts today.

Here are some ways that smart contracts can improve an athletes contact:

1. Performance-based bonuses: Smart contracts can automatically trigger payments to the athlete based on predefined performance benchmarks, eliminating the need for manual processing and reducing the risk of errors.
2. Sponsorship and endorsement deals: Smart contracts can automate the payment of sponsorship and endorsement fees based on pre-defined terms, such as the number of social media posts made by the athlete, the number of goals scored, or the number of appearances they make on behalf of the sponsor.
3. Release clauses: Smart contracts can automatically trigger the release of an athlete from their contract based on predefined conditions, such as the athlete reaching a certain age or the team failing to meet certain performance goals.
4. Contract renewals: Smart contracts can automate the process of contract renewals by triggering negotiations and executing the terms of the new contract when both parties agree.

What athlete would you want to see enter into a smart contract? Bonus points for telling us in the comments below.

3) Fees are low, and speeds are fast in DeFi, making the current financial system status quo comparatively archaic

One of the main advantages of DeFi is that it can offer low fees and fast transaction speeds compared to traditional financial systems.

DeFi fees are typically lower because they are paid in the form of the cryptocurrency used on the platform rather than in traditional fiat currencies like the US dollar. This means that the fees are subject to the same supply and demand dynamics as the underlying cryptocurrency, which can result in lower fees. In addition, DeFi platforms often use automated market makers and other mechanisms to facilitate transactions, which can further reduce fees.

DeFi speeds are generally faster because transactions are processed on a decentralized network rather than relying on a centralized authority to be validated and cleared. This means that DeFi transactions can be settled more quickly, as there is no need for a central authority to process them.

Overall, the low fees and fast speeds offered by DeFi platforms could make them a more attractive option for people looking to use financial services, potentially leading to a shift away from traditional financial systems. However, it is worth noting that DeFi is still a relatively new and rapidly evolving field, and it still needs to be clarified how it will ultimately impact the broader financial landscape as explored here by analyst Tascha Che.

Figure A

Injective is a prime example of low DeFi fees. Executing transactions on the platform cost <$0.01 (Figure A). Trading on Injective requires zero gas, and the relayers pay the gas fees. Additionally, the fees are redistributed to the Injective community, and the platform also has a buy-back program–after distributing 40% of the trading fees to exchange DApps, Injective conducts a buyback with the remaining 60%.

4) Yields and interest rates become competitive between protocols. Each protocol competes for high rewards and sustainable ecosystems

DeFi protocols can compete for high yields by offering a wide range of financial products and services, such as lending, borrowing, and staking. Each protocol may offer different terms and conditions for these products (e.g., such as the interest rates or rewards offered) making a platform more attractive to users. For example, a protocol that offers higher interest rates on its lending products may be more appealing to users than one that offers lower rates.

Another way that DeFi protocols can compete is by offering unique features or incentives that make them more attractive to users. For example, a protocol that offers a referral program or other rewards for bringing in new users may appeal more to users than one that does not.

Finally, DeFi protocols can also compete by building strong and sustainable ecosystems. This can involve having a strong community of developers and users, building partnerships with other organizations, and ensuring the protocol is secure and well-maintained. A strong and sustainable ecosystem can attract more users to the protocol, leading to higher yields and interest rates.

Speaking of the community, now is a good time to bring up some awards Helios has won through Injective.

Awards Won By Helios For Participating in Injective’s Equinox Staking:

• Top Staker (First Place): An award given to the validators for staking the largest amount of INJ.
• Community Content Awards (Big Brain Thought Leader Award): The award is distributed to validators who produce the highest volume of educational content.
• Most Delegates Award (Second Place): Given to the validators that onboarded the highest number of INJ delegates.
• Team Player (Honorable Mention): The award is given to validators which were most helpful to other members of the Injective community, like other validators, during the duration of Equinox.

Competition Driving Efficiency

Decentralized finance (DeFi) is a relatively new and rapidly evolving field, and competition is an important factor driving efficiency in the DeFi market.

One way that competition drives efficiency in DeFi is by encouraging innovation. When there are multiple DeFi protocols and platforms in the market, they are incentivized to come up with new ideas and improvements to stand out from the competition. This can lead to the development of new technologies, products, and services, making the DeFi market more efficient and user-friendly.

Competition can also drive efficiency in DeFi by promoting price discovery. Multiple buyers and sellers in the DeFi market can negotiate and agree on prices that reflect the true value of the assets being traded. This helps ensure that prices are fair and accurate, making the DeFi market more efficient overall.

Finally, competition can drive efficiency in DeFi by promoting efficiency in production and distribution. When there are multiple DeFi protocols in the market, they are incentivized to find ways to produce and distribute their products and services more efficiently to reduce costs and increase profits. This can lead to the development of more efficient processes and technologies, which can benefit both producers and communities.

Overall, competition is an important driving force in the DeFi market and can lead to greater efficiency and innovation in the industry.

5) Inclusivity — DeFi is permissionless, meaning no central body regulates participation. This provides equitable access to global infrastructure and its opportunities to all without prejudice

Cryptocurrency and decentralized finance (DeFi) are often considered inclusive because they provide access to financial services and infrastructure without the need for permission from a central authority. This can be especially beneficial for people in countries where traditional financial systems may be less developed or where access to financial services is limited.

One of the key features of cryptocurrency and DeFi is that they are permissionless, meaning anyone can participate without needing approval from a central authority. This makes it possible for anyone with an internet connection to access services, regardless of location or background.

In addition, DeFi is built on decentralized networks, which are designed to be open and transparent. This means that the rules and regulations governing the operation of DeFi protocols are publicly available and can be accessed by anyone. This can ensure that the DeFi ecosystem is fair and equitable, as everyone can access the same information and make decisions based on the same rules.

Overall, the permissionless and decentralized nature of cryptocurrency and DeFi can provide equitable access to financial services and infrastructure for people worldwide, regardless of their location or background.

6) Risks involved: smart contract vulnerabilities, oracle inefficiencies, self-custody risks, scaling problems

1. Smart contract vulnerabilities: As mentioned earlier, smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. While smart contracts can offer several benefits, such as increased efficiency and the ability to facilitate complex transactions, they can also be vulnerable to certain types of errors or attacks. For example, if there is a bug in the code of a smart contract, it could be exploited by an attacker to gain unauthorized access to funds or information. It is important for users of smart contracts to carefully review the code and conduct audits to identify and address any potential vulnerabilities. The DAO (2016 attack) is a prime example of the perils of code having a bug.
2. Oracle inefficiencies: An oracle retrieves and verifies real-world data and inputs it into a blockchain. Oracle inefficiencies can occur when oracle cannot retrieve or verify the data promptly or when the data it retrieves needs to be corrected or manipulated. This can lead to incorrect or unreliable information being recorded on the blockchain, which can have serious consequences for users relying on that data.
3. Self-custody risks: When holding cryptocurrencies, it is important to ensure the security of the private keys that grant access to your funds. If you lose your private keys or they are compromised, you will no longer have access to your funds. This is known as the risk of self-custody. To mitigate this risk, it is important to use secure storage methods, such as hardware wallets or multisig wallets, and to follow best practices for securing your private keys.
4. Scaling problems: As the number of users on a blockchain network increases, the amount of data being processed by the network also increases. This can lead to scalability issues, where the network must process transactions promptly, resulting in slow transaction speeds and high user fees. Various approaches are being developed to address scalability issues, such as off-chain transactions and sharding, but these solutions are still being implemented and tested.

7) Not your keys, not your crypto

“Not your keys, not your crypto” is a phrase that is often used to emphasize the importance of holding and controlling your private keys when it comes to owning cryptocurrencies. Private keys are an alphanumeric string that serves as a secret code granting access to your cryptocurrency funds. If you do not hold your private keys, you do not have full control over your funds and risk losing access if something happens to the entity that holds your keys (such as a hack or a breach).

The phrase “not your keys, not your crypto” is meant to remind users that it is important to take responsibility for their funds’ security and ensure that they have control over their private keys. This can be accomplished through self-custody solutions such as hardware wallets or software wallets that allow you to control your private keys.

It is important to note that while holding your keys does give you greater control over your funds; it also comes with added responsibility. Losing your keys or having them compromised could result in the permanent loss of your funds. As such, it is important to follow best practices for securing your keys and to choose a storage solution that is appropriate for your needs.

Injective offers a permissionless trading experience on exchange dApps which are built on top of the blockchain, where you don’t have to hand over your keys to interact with their blockchain. This mechanism allows the Injective community to create and trade across all derivative markets of their choice in a fully decentralized manner.

8) Governments, institutions, and Centralized exchanges jostle for position and power in the emerging space

Centralized cryptocurrency exchanges are similar to banks in that they act as intermediaries facilitating financial asset exchange. In the case of a bank, these assets are typically traditional fiat currencies and securities, while in the case of a centralized cryptocurrency exchange, the assets are typically cryptocurrencies.

One way centralized cryptocurrency exchanges are similar to banks is that they often hold their users’ assets in custody, meaning that they control the private keys to the cryptocurrency wallets belonging to their users. This allows the exchange to facilitate trades on behalf of its users without requiring them to transfer the existing assets between each other.

Like banks, centralized cryptocurrency exchanges can also use the assets they hold in custody as leverage to generate returns. For example, an exchange might lend out the assets it holds to other parties in exchange for interest, or it might use the assets as collateral to secure loans. This can create additional risks for users, as the exchange effectively takes on debt using the assets in its custody as collateral (similar to FTX). If the exchange cannot meet its debt obligations, it could potentially result in losses for its users.

It is important for users of centralized cryptocurrency exchanges to be aware of these risks and to carefully consider the security measures in place to protect their assets. It is generally considered safer to hold your private keys and use self-custody solutions, such as hardware wallets, rather than entrusting your assets to a third party.

Since Injective Protocol is permissionless, it doesn’t have the same issues as centralized exchanges.

What is Injective?

(Figure A)

Now, let’s turn the focus to Injective. Injective is a specialized interoperable layer one blockchain built with the Cosmos SDK and Tendermint. It allows anyone to build powerful exchange, DeFi, derivatives & Web3 applications with fast transaction times and instant finality.

One of the key features of Injective is its cross-chain compatibility. Users can trade assets across blockchain networks, such as Ethereum, IBC-enabled chains, Solana, BNB Chain and many other prominent layer ones, without intermediaries or a centralized exchange. This allows for greater liquidity and accessibility, as users are not limited to trading only on a single blockchain.

Injective also utilizes a decentralized governance model, allowing INJ stakers to have a say in the decision-making process of the platform. This helps to ensure that the blockchain is transparent and accountable to its users.

In addition to its DEX functionality, Injective offers a liquidity mechanism that enables market makers to provide liquidity to the exchange dApps built on Injective for an INJ reward pool. This helps increase the platform’s liquidity and allows users to earn income by providing liquidity.

2022 in Review for Injective

Helios staking is one of the largest validators of Injective, with $3M+ INJ staked across 600+ holders.

Closing the Latest Funding Round

Announced in August of 2022, Injective raised $40 million in a funding round led by Jump Crypto. The funds will be used to expand the ecosystem efforts and improve its cross-chain compatibility.

In April 2021, Injective announced a $10-million “party round” led by Pantera Capital, with participation from Mark Cuban and other investors. Injective plans to use this funding to provide a user-friendly interface similar to popular stock trading platforms, such as Robinhood, making it more accessible to a wider audience. The funding will be used to develop further and expand the platform, as well as to hire additional team members.

Partnership and Integration with Wormhole

In December 2022, Injective completed the integration with Wormhole Bridge, a tool that allows for transferring assets between different blockchain networks via smart contracts. The integration is meant to improve the cross-chain accessibility of Injective, and enable users to move assets between different blockchains more easily.

Wormhole Bridge is a decentralized tool that uses smart contracts to facilitate the transfer of assets between different blockchains, creating cross-chain liquidity pools and enabling users to access a wider range of assets. The exchange dApps built on Injective aim to provide a secure and transparent platform for decentralized trading — the integration of Wormhole Bridge is intended to enhance its capabilities in this regard.

The integration of Wormhole first started through a partnership earlier in 2022. Through the initial partnership, 10 new blockchains were added to Injective’s network, increasing its cross-chain accessibility and allowing users to access a wider range of assets. This integration has enhanced Injective’s capabilities as a DEX platform, providing users with greater security and transparency in their trades. Adding the ten new blockchains will also expand Injective’s reach and potentially attract new users to the platform.

Ecosystem Growth

The Injective ecosystem grew at an astounding pace in 2022, especially with a lot of developers coming on board to build and deploy groundbreaking applications. There are five exchange dApps (Helix, Dexterium, INJDojo, Wavely and Qwerty Exchange) currently built on Injective, each with customized frontend and offering different features and access.

Another highlighted dApp built on Injective is Frontrunner. It’s a decentralized sports prediction market, which launched its testnet and raised $4.75M in a seed round.

Kado also has become the first fiat on ramp solution for Injective, which opens an important gateway for Web2 users to onboard into Web3 by allowing for an easier fiat-to-crypto onboarding process for all users!

In Conclusion

As mentioned earlier, DeFi projects prioritize certain principles and pillars that position them as the future of finance.

Some of these principles include:

• Trustlessness and transparency: One of the main goals of DeFi is to create a financial system that is trustless and transparent. This is achieved through smart contracts, decentralized exchanges, and decentralized governance models. These features help to ensure that financial transactions are secure, transparent, and accountable to users.
• Accessibility and inclusivity: Many traditional financial systems exclude certain individuals or communities due to strict KYC and AML regulations. DeFi projects, on the other hand, often do not require users to go through such processes, allowing for greater accessibility and inclusivity. The goal of DeFi is to create a financial system accessible to everyone, regardless of their location or financial status.
• Efficiency and cost-effectiveness: DeFi projects aim to create a more efficient and cost-effective monetary system

Decentralized finance (DeFi) is a movement within the cryptocurrency space that aims to use blockchain technology to create a more open, transparent, and decentralized financial system. DeFi projects, such as Injective, focus on building decentralized applications (dApps) that enable users to interact with financial products and services in a trustless and transparent manner using smart contracts and decentralized exchanges (DEXs).

DeFi aims to create a financial system that is accessible to everyone, regardless of their location or financial status, and has the potential to provide financial services to those who may not have access to them otherwise. DeFi differs from traditional finance in that it is decentralized, transparent, and operates without intermediaries or strict know-your-customer (KYC) and anti-money laundering (AML) regulations (which varies from country to country).

There are several core pillars and trends in the DeFi space, including trustlessness and transparency, the use of smart contracts, low fees and fast speeds, competitive yields and interest rates, inclusivity, and self-custody. Injective has had a successful year in 2022, with several achievements and milestones. It has the potential to take DeFi to new heights and continue to drive the growth of the decentralized finance ecosystem.