Swap Online develops Decentralized Finance (DeFi) extension for its protocol. Part 1
Using Atomic Swap as a cross-chain solution significantly expands the market size of any Decentralized Finance product
The background
Since the beginning of the blockchain era in modern IT industry, a lot of enthusiasts have philosophized about how this technology could transform currently available financial services. On the other hand, conservative representatives of the banking infrastructure have been trying to oppose all attempts of changing the existing order of things.
Nevertheless, both blockchain technology and cryptocurrencies (as the product of blockchain) continue evolving and developing. In 2017, the main question for investors was “Which cryptocurrency or token should I invest my USD in to gain more USD?”. In 2019, many investors were asking “Who can I lend my BTC to so as to gain more BTC?”. This is where DeFi comes in.
A short overview
Actually, any decentralized ecosystem could pretend to be a DeFi. The crypto funds (such as Satoshi Fund) and such projects as The DAO showed the world an alternative to existing financial services. Decentralized financial systems are meant to be transparent with low costs for processing (controlled by smart contracts) and foresee the exclusion of any type of manipulation from their creators (which can happen with centralized competitors). Moreover, with the assistance of utility tokens, the governance of such systems could be in the hands of the decentralized community, not only the founders.
“The cons” of such systems appeared to be in their embodiment. The first of such systems was built by the developers and for developers, excluding mass adoption and the weakness in UX implementation. And, of course, it was not ideal in its structure, as it included vulnerabilities in both the core source code and protocol architecture. It caused the failure of some DeFi projects (such as The DAO) and the closing of some crypto funds. But, such mistakes have not ruined the idea of decentralized finances, as the adopters made some conclusions and moved on.
But development goes on. Modern DeFi projects are becoming more successful than their predecessors. Such projects as MakerDAO are showing significant progress in mass adoption, including user friendly interfaces, educational programs and security audits to protect the system from The DAO’s fate. Still, modern DeFi projects has one crucial problem — they are being concentrated on one blockchain, a factor which critically reduces the functionality of such systems. For example, if you want to participate in a Ethereum-based DeFi system, but you have only Bitcoin, then you first have to exchange this Bitcoin to Ethereum via a centralized exchange. That is where we, The Swap Online, come in.
More blockchains — more users
From the beginning, the Swap Online protocol possessed itself as a bridge connecting different blockchains without the need for third parties, such as centralized exchanges. However, providing decentralized cross-chain trades is not making use of a DeFi system. Yet. We are not stopping on a non-custodial exchange as the one and only product of our protocol. By adding new roles and functions in our ecosystem, we are becoming a cross blockchain DeFi protocol. And here are the most notable examples.
Liquidity Provider — a new role in our ecosystem
A Peer-to-peer Atomic Swap exchange presumes that there should be at least two parties to the exchange — somebody who wants to buy and somebody who wants to sell. To provide our customers with active orders, we are adding a Liquidity Provider role in our ecosystem. On the other hand, it gives a way of gaining passive income by freezing money on a market making bot that will create offers for buying/selling cryptocurrency. Each trade will yield some fee to a Liquidity Provider. The Provider can unfreeze and withdraw their funds at any time. Such a system benefits all the participants of Swap Online.
The most obvious solution for Liquidity Providers is the BTC-ETH trading pair, as the most popular one. When it comes to ERC-20 tokens, it is possible as well. We think that projects with ERC-20 tokens would become liquidity providers for their community to demonstrate their responsibility before the community. It may also become a new way of distributing tokens after the IEO hype falls. Within such system, there is no way of manipulating the token price, since it is completely decentralized.
COMMODITY TRADING ON SWAP ONLINE
The main trend in token offers is changing from year to year. In 2016–17, it was utility tokens and ICOs as the main means of distribution. In 2018, everyone discussed the possibilities of security tokens and STOs as a new model for crowdfunding. Even though there were a few notable STOs, the model has not replaced ICOs, because the IEO appeared to be main form of token distribution from the beginning of 2019. But what is really interesting in 2019 is the development and evolution of stablecoins.
While cryptocurrencies and digital assets are becoming a legit reality in some countries, stablecoins are achieving new functions as a way of digitizing the functions of commodities, such as gold and even oil. How is that related to our project? Pretty simple. You can buy a stablecoin backed by USD, such as PAX with your credit card. Somebody else is buying a gold-backed token, such as GoldZip with his credit card. With the assistance of Swap Online, you could exchange your USD to Gold and vice versa, or buy using such a commodity token. Normally, such operations require a lot of processing power, registrations, verifications and, of course, a lot of time.
Our peer-to-peer protocol grants instant exchange for such things with no KYC, no registration, no server or any other third party. Everything is controlled by smart contracts. Just the buyer and the seller are involved.
STABLE COIN LAUNCHPAD
And here comes the other function related to stable and commodity tokens — an easy way for purchasing it with major cryptocurrencies. You can say it looks like a simple exchange, but it is not. You do not need to deposit your funds, withdraw them, or pass the KYC. Just pick up the commodity you need and buy it with your BTC or ETH, or whatever. With time, we will redevelop a new version of our market-maker bot and give Liquidity Providers new possibilities to trade commodities and stable coins.
To be continued…
Swap Online Essential Links
Website: https://swap.online
GitHub: https://github.com/swaponline
Telegram: https://t.me/swaponline
Facebook: https://www.facebook.com/Swaponline
