Deep Dive Into Xend Finance Layer-2 DeFi Protocol
In this article, we will be diving deep to learn about the Xend Finance Layer-2 DeFi Protocol, but before jumping onto that, let’s first understand Layer-1 and Layer-2 DeFi Protocol in brief.
If you are new to DeFi and want to know about DeFi (Decentralized Finance), read this beginners’ Guide/Article to/on DeFi.
What Exactly is a Layer-1 and Layer-2 DeFi protocol?
A Layer-1 protocol refers to the system related to the base architecture of a blockchain network. It is the protocol upon which the entire network and its parameters are built on. For example, blockchain networks like Bitcoin and Ethereum are regarded as Layer-1 protocols because they exist on their own and are created as a base architecture for their network; they are not built on any other blockchain network or protocol. Layer-2 protocols, on the flip side, are secondary protocols that are built on existing networks. The goal of Layer-2 protocols is to solve scalability and transaction speed issues in Layer-1.
Now that we have a basic understanding of Layer-1 and Layer-2 protocols let’s get into the concept of Layer-1 DeFi protocols. It is a primary DeFi framework that exists and does not interact with any other DeFi protocol. Layer-1 DeFi protocols only interact with users and oracles; such protocols include Compound, Aave, Venus, Fulcrum, etc.
A Layer-2 DeFi protocol is a secondary protocol composed of many Layer-1 DeFi protocols within a blockchain or across several blockchains. The main goal is to increase scalability by providing a higher yield than many of the individual yields of Layer-1 DeFi protocol. Examples include Xend Finance on Binance Smart Chain and Polygon, Yearn Finance on Ethereum Blockchain.
Why are Layer-2 DeFi Protocols Important? / What Significance Layer-2 DeFi Protocols Bring to DeFi?
Currently, there are over 221 Million crypto users in the world. Out of the $404.1Trillion assets of financial institutions worldwide, only $157 Billion (0.3%) of these global financial assets are the total value locked in DeFi. Layer-2 DeFi solutions will help ensure that there is an increase in scalability and yield, resulting in more money moving from traditional finance into DeFi.
Xend Finance’s Layer 2 DeFi Products
Xend Finance is leading in the industry with some of the most advanced innovations and smart products to increase the yields for users. In our way to paving the way for the future of DeFi and decentralizing Africa and beyond, we have recently launched our smart Layer-2 cross-chain auto yield aggregators on Binance Smart Chain and Polygon, which are:
- xAuto: The Xend Finance auto aggregator will automatically shift funds across different lending protocols to provide very high yields without the need for input from the user.
- xVault: The x-vault system is a system that implements multiple yield generation strategies that automatically seek out the highest yields available in DeFi. These x-vaults accept your deposit, then the vault system distributes the funds through multiple strategies, which automatically seek out the best yields (inspired by Yearn Vaults). Supported Blockchains: BSC and Polygon.
Xend Finance xVault Architecture
Layer-2 protocols are, undoubtedly, the next wave in the DeFi industry, and Xend Finance has taken the position to lead this wave. The most important concern for users has always been how to increase the yields for their assets; this is exactly why Xend has provided innovative ways using the layer-2 DeFi protocol to increase yields for end-users.
Our channels
Come and be part of the x-builders community! We share the latest updates on everything $XEND and build on the Xend Layer-2 protocol in the channels below. Our community channels are open for questions, suggestions, and help from the team.
Twitter : https://twitter.com/xendfinance
Discord: https://discord.gg/RhgyRkUf
Telegram: https://t.me/XendFinanceDevs
