QANplatform Use Case Story: DeFi
Learn about decentralized finance (DeFi) and why building quantum-resistant DeFi protocols on QANplatform is the logical step.
Decentralized finance (DeFi) is a billion-dollar industry with the potential to change the global financial system for the better. The DeFi movement provides Internet-native financial products and services that anyone with an Internet connection can access.
Read on the learn more about DeFi and why building quantum-resistant DeFi applications on QANplatform is the next logical step for developers.
What is DeFi?
Decentralized finance (DeFi) provides innovative financial products and services to anyone with an Internet connection without relying on financial intermediaries like banks. The DeFi market, which only gained mainstream attention in 2020, is now worth almost $100 billion, and recording more than 10x growth in value locked since then.
DeFi leverages smart contracts and blockchain technology to provide an open and trustless financial market.
DeFi allows you to save, borrow, lend, trade, invest, insure, and make borderless payments in a decentralized and affordable manner.
The DeFi market doesn’t discriminate or restrict users. Anyone from anywhere in the world, regardless of age, race, religion, or location, can access solutions with an Internet connection and a crypto wallet.
Developers can easily build decentralized finance applications by leveraging existing open-source code to create new solutions that address market demand.
In DeFi, transactions are automatically executed via smart contracts and recorded on decentralized, immutable, and transparent public blockchains.
Smart contracts automatically execute immediately when predetermined conditions of a transaction/agreement are met, eliminating the need for a trusted financial intermediary.
The blockchains that DeFi runs on ensure that once a transaction is executed, it is unalterable, leaving room for anyone to audit the system and inspect the legitimacy of transactions.
Decentralization ensures that no one party can gain control of a DeFi application and cheat the system. To effectively carry out such an attack, one will need to gain control of more than 50% of all nodes in the blockchain that the DeFi protocol runs on. However, the possibility of this is extremely low, especially on large blockchain networks.
Also, the cryptographic techniques employed in DeFi projects is a plus as it helps to protect the identity and wallets of users.
Although with the advent of quantum computing, the security of DeFi projects may be compromised except if a quantum-resistant approach is employed.
DeFi Uses Cases
Countless DeFi protocols have emerged in the last two years to address an array of market needs. Let’s take a look at some of the most popular use cases in today’s DeFi market.
Decentralized Exchanges (DEX) — Decentralized exchanges allow anyone to trade crypto assets without the need for a centralized orderbook. Most decentralized exchanges utilize a concept known as automated market makers (AMM) where traders trade against liquidity held in smart contracts. Additionally, AMMs have introduced a new stream of income for crypto holders as they can use their tokens to provide liquidity for the AMM protocol and earn interest on it.
Lending & Borrowing — DeFi is gaining traction from the lending/borrowing sector as thousands of users are earning income by lending their digital assets instead of leaving them idle in their wallets. Borrowers can also easily access capital as they can borrow digital assets from other users, paying them interest.
Stablecoins — DeFi protocols offer digital tokens pegged to the fiat currencies, typically the US dollar. Stablecoins sit at the heart of the DeFi market as they enable investors to escape the volatility of crypto assets without leaving the crypto market. Some stablecoins are backed by fiat currencies held in reserves while others are kept stable through algorithms. In the decentralized lending markets, stablecoins are particularly popular.
Insurance — Just like traditional insurance, DeFi allows you to purchase insurance against possible unforeseen or unfortunate events. In the DeFi space, these can be protocol hacks, smart contracts failure, or market crashes. However, unlike traditional institutions, the risk of providing insurance is shared among a pool of investors who receive the insurance premium.
Staking — Staking digital assets is another way of earning yield on crypto assets. Whether you are staking a Proof-of-Stake-based cryptocurrency or are staking tokens in a DeFi protocol, you can earn substantial yields in the staking market.
Digital asset management, yield farming, and decentralized derivatives trading are also popular user cases in DeFi.
Top DeFi Platforms
Now, let’s take a look at some of the leading DeFi applications to gain insight into what’s already possible in the world of decentralized finance.
Aave — Aave is an open-source lending & borrowing platform that allows users to earn interest on deposits and borrow capital. This lending & borrowing platform is now valued at over $2 billion, with more than $20 billion locked on its platform across seven blockchain networks.
Curve Finance — Curve Finance is an automated market maker that allows users to trade stablecoins and earn yield as a liquidity provider. It currently has $19.5 billion locked on the platform and enjoys over $350 million in daily transaction volume.
dYdX — dYdX is a decentralized derivatives trading platform where users can trade cryptocurrency derivatives autonomously without the need for a central authority. The protocol has almost $1 billion in locked assets. Moreover, it processes more than $1 billion in trades daily, making it one of the biggest trading platforms though it was only launched in 2019.
Uniswap — Uniswap, which is the oldest automated market maker, enables traders to exchange digital assets while encouraging liquidity providers by paying rewards. It is the biggest decentralized exchange with almost $2 billion in daily trading volume. It also has almost 4 million users, making up over 55% of the decentralized exchange market.
While all of these DApps started out on the Ethereum blockchain, most DeFi applications are exploring newer and better blockchains to ensure they can offer the best possible product to their users. Becoming quantum-resistant by moving onto QANplatform would be one of the ways to achieve that.
DeFi Opportunities & Risks
The DeFi market is still in its infancy, which means there are plenty of opportunities but also an ample amount of risk for developers and users.
Risks
- High fees in most DeFi platforms can be a drawback for mainstream adoption.
- The absence of regulations is a drawback for many investors.
- Complexities in some DeFi platforms can result in a poor experience for users.
- The volatility of DeFi tokens may not be appealing to people who are only interested in accessing basic financial services.
- Security may be threatened when quantum computing goes mainstream.
Opportunities
- DeFi provides easy access to financial services.
- Transactions are immutable and can’t be manipulated by a third party.
- The transparency of DeFi platforms is very high as anyone can audit and track transactions in them. The codes of DeFi protocols can also be audited for bugs by the wider crypto community.
Building Quantum-Resistant DeFi Applications on QANplatform
While DeFi still battles with many challenges, the quantum-resistant, next-generation blockchain platform, QANplatform, aims to address these issues.
QANplatform is a layer 1 hybrid blockchain that allows developers to build quantum-resistant DeFi protocols by leveraging its wide range of capabilities.
Developers who use QANplatform can build DeFi solutions in all Linux Kernel compatible languages of their choice. The platform aims to be a well-equipped ecosystem for DeFi through its integrations to major cloud platforms (Amazon AWS, Microsoft Azure, Google Cloud Platform…), DevOps technologies (Docker, Kubernetes), Indexing and Oracle APIs (Chainlink, Band Protocol).
Unlike popular blockchains that may falter when faced with the power of quantum computing, QANplatform employs a Lattice-based post-quantum cryptographic algorithm via the Rust programming language to secure DeFi protocols that run on top of its blockchain.
QANplatform also ensures DeFi protocols are completely 99.9% green and extremely cheap through its unique Proof of Randomness (PoR) consensus mechanism. This consensus mechanism eliminates the need for energy-intensive hardware as anyone can be a validator on QANplatform using a mobile phone or Raspberry Pi.
Additionally, QANplatform rewards developers after each smart contracts deployment and public blockchain transactions where their code part is reused by other developers.
Developers who have already developed DeFi solutions on Ethereum can easily port to QANplatform through its Ethereum Virtual Machine compatibility.
The smart contract feature is targeted for H1 2022.
Sign up for the QANplatform Newsletter to receive notifications about the DeFi feature launch.
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About QANplatform (QAN blockchain platform):
QANplatform is the quantum-resistant Layer 1 hybrid blockchain platform that will allow developers and enterprises to build quantum-resistant: smart contracts, DApps, DeFi, DAO, NFT, tokens, Metaverse, and Web3 solutions on top of the QAN blockchain platform in any programming language.
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