How to take your first steps with crypto and DeFi?
What is DeFi and why is it important?
Think of the changing world that we currently live in. Old financial systems are crumbling under the immense pressure of an economic downturn and new ones appear, seemingly more flexible and resilient. It is no wonder that during these trying times, both among old-timers in crypto and absolute novices, DeFi (Decentralized Finance) has been capturing more and more attention and gaining traction.
Why is DeFi becoming important? DeFi gives the ability to anonymously use financial services without restrictions and intermediaries, leveraging the technology of trustless decentralized networks. The absolute ownership of assets is becoming crucial for traders, investors and laypeople alike, and they become motivated to seek alternative ways to trade or preserve value. Even though it is still unclear whether DeFi is capable of replacing traditional financial products, it becomes evident that it can serve as a more convenient extension, seeing how difficult it is for a large proportion of the population to use financial services to their advantage, due to various restrictions and regulations.
Creators of DeFi services are capable of radically transforming how people use financial services. This can happen both in developing countries and those that already have an infrastructure in place, where financial services are well-established, yet suffer from many restrictive issues. For example, most services require that you put your privacy at risk and share personal documents that could be misused. There are usually expensive intermediaries such as brokers or advisers, and the entire process is centralized and almost never transparent. DeFi on the other hand, provides freedom of choice without discrimination based on age, credit history or nationality.
It is no secret that early cryptocurrencies such as Bitcoin already provide disruptive ways for people to exchange value and data between each other. However, the key problem that any user who wants to try crypto encounters, is volatility, which hinders the large scale adoption of cryptocurrency, due to the speculative nature of these markets. This is where stablecoins come into the picture.
To tackle the issue of volatility, fiat-based stablecoins were created, such as USDT and TUSD. The entities behind those stablecoins ensure price stability by keeping sufficient fiat reserves to back the coins circulating on the open market. Thereby, their users have to rely on centralized entities which often lack transparency, thus, there has been a lot of backlash related to fiat-based stablecoins. Enter Neutrino Protocol and the first USD-pegged asset based on it: USDN (Neutrino USD).
Introducing Neutrino USD (USDN)
Neutrino USD (USDN), which is an algorithmic stablecoin, represents a big improvement over the fiat-based stablecoins. It uses crypto (WAVES) as a reserve, and the entire system is calibrated so that all the checks and balances ensure that Neutrino USD tends to keep a stable price, meaning that users receive stability and absolute transparency.
Neutrino Protocol, which USDN is based on, is an algorithmic price-stable cryptocurrency protocol that allows for the creation of stablecoins tied to a specific real-world asset, such as national currencies or commodities, and collateralized by a native token.
Neutrino USD is only the first stable coin with the price tied to the USD dollar, which means that 1 USDN will always cost 1 dollar through the smart contract. The stability of the USDN rate on exchanges is maintained through algorithmic stability and market arbitrage. Potentially, there can be many more synthetic assets based on the protocol tied to various types of assets and financial instruments, such as EUR Neutrino, Gold Neutrino, Oil Neutrino etc. as well. Neutrino protocol will allow for tokenizing national currencies or commodities, by algorithmically maintaining the economic stability of the synthetic asset rate. A separate module called Collider is in the works to ensure the proliferation of those new Neutrino-based tokens.
In terms of components that underlie the current Neutrino Protocol implementation and ensure the overall stability, there are three “intertwined” tokens: Waves, USDN and NSBT.
Waves is the token of Waves Platform, based on the consensus algorithm called “Leased Proof of Stake”. Waves is used as the reserve token to back USDN. With USDN, any deviation from $1 on exchanges is compensated by well-tested arbitration mechanisms, which are described in great detail in the white paper.
And finally, the NSBT (Neutrino system base token), which is perhaps the most distinctive component, is needed to maintain a steady amount of reserves on the smart contract. This special token is useful in case of diminishing Waves reserves because it creates an incentive to replenish those reserves through buying NSBT.
Much more info about the theory behind Neutrino can be found in the white paper.
How to try DeFi via Neutrino?
One of the primary elements of DeFi services is called staking, a decentralized mechanism that lets users earn passive rewards through underlying blockchain mechanisms. USDN, as a stablecoin that provides staking, leverages the staking reward system of the Waves LPoS (Leased Proof of Stake) algorithm. Stakers of USDN receive their daily staking rewards with attractive rates of 8–15% APR* without having to worry about price volatility, while being fully in control of their assets from the comfort of their wallet.
What does decentralized mean in practice? USDN staking is governed by a smart contract, not by a central authority and the holder has exclusive control over their assets which are shielded from centralized actors that can easily “expropriate” funds from accounts. Staking USDN is safe because the assets are always controlled by the users. It is possible to replenish or withdraw assets at any time without losing already accumulated rewards.
If you’d like to participate in the staking process:
1. Pick an exchange: Waves.Exchange, Kucoin, Hotbit, MXC
2. Buy USDN with fiat or crypto
3. Stake your USDN
4. Start earning daily rewards after 24 hours
Neutrino offers benefits to numerous types of users:
- Traders
In Neutrino dApp, any asset based on the Neutrino protocol can be exchanged at a fixed price. Neutrino system base token (NSBT) ensures that in case of diminishing reserves in underlying assets at the smart contract there is an incentive to replenish them through the purchase of NSBT.
- Investors
Neutrino Protocol uses all the benefits of Waves Protocol LPoS. All the USDN tokens can be staked with a ~7% annual interest. Invest in USDN using beta.neutrino.at or your Waves.Exchange profile.
- Others
Neutrino tokens can be staked to receive passive income. Also, Neutrino stablecoin is used for payments in applications based on Waves protocol, for example Waves.Exchange
What’s next?
With each year, DeFi protocols such as Neutrino provide more ease of use and more stability. DeFi has become increasingly more popular by being able to provide real value with mitigated risks. By using Neutrino, many opportunities become available for a user. Buying USDN with fiat and trading it to other, non-Waves based currencies is possible, opening up ways to enter other ecosystems that provide other DeFi products.
Even so, the fragmentation inherent to the crypto industry remains a key factor that renders the systems largely isolated. A user that enters a single ecosystem is barred from accessing others. Lucky for us, the lack of inter-chain communication between different products and services is being solved. The more integrations are introduced, the easier it is for users to seamlessly interact with different systems without studying a plethora of tools and products in depth.
With the advent of Gravity Protocol, a new asset space for all blockchain ecosystems with instant swaps between assets will become accessible, which is called Interchain DeFi. Not limited to a single chain, developers from both ecosystems will be able to create modern cross-chain dApps which will work in both chains via wallets and browser extensions preferred by users. Therefore, through Gravity, USDN will become a key that opens the door to infinite financial opportunities provided by the cumulation of all DeFi ecosystems.
Join us!
Github: https://github.com/Neutrino-Protocol
Neutrino dApp: https://neutrino.at
Medium: https://medium.com/@neutrinoteam
Twitter: https://twitter.com/neutrino_proto
Telegram : https://t.me/neutrino_group
