There is no denying the fact that decentralized finance (DeFi) has quickly emerged as one of the most important use cases related to the cryptocurrency market.
This is best reflected by the market’s continued growth, with total capital locked within the space increasing from $45 billion to nearly $80 billion during the past 12 months.
In its most basic sense, DeFi can be thought of as a blockchain-based technology that allows the creation of novel applications that provide individuals around the world with access to high-quality financial services, including lending/ From lending to P2P trading to betting. ,
DeFi on Polkadot – An Overview
As things stand, a large part of the DeFi sector remains centered around the Ethereum ecosystem, however, due to its huge scalability limits (15-30 TPS), the network has been known to regularly charge transaction fees. That’s as high as $20 – $50 per txn during peak times – excruciatingly slow compared to many of its closest rivals.
Ethereum’s inability to provide users with low-cost, real-time transactions has seen an increasing number of DeFi enthusiasts adopt competing network Polkadot as the latter has a throughput rate of 1,000 TPS compared to Ethereum’s 5 min. and offers a confirmation time of less than 120 seconds.
Furthermore, unlike its closest rivals including Cardano, Ethereum, Solana, Binance Smart Chain – all of which are essentially standalone blockchains – Polkadot transforms the crypto sector from a cluster of individual projects into a single unified ecosystem. where various decentralized apps are able to communicate with each other with the touch of a button built into different networks.
In this regard, Polkadot uses a parachain based setup, in which each chain can be treated as a separate project capable of transacting with all remaining parachains in the system, thus allowing seamless transfer of value. (whether it is encrypted data, funds, personal information, etc.).
Projects worth noting
centrifuge
Centrifuge is considered the world’s first decentralized operating protocol built on top of the Polkadot network. It helps to connect ‘real-world assets’ (RWAs) to the growing DeFi universe, with the aim of reducing capital cost requirements for small and medium-sized enterprises (SMEs).
Since SMEs require a lot of third-party monetary involvement to grow sustainably (especially when compared with major corporations) they need easy access to capital.
Centrifuge streamlines capital accumulation by allowing businesses to exchange a wide range of documents – such as invoices, tax receipts, etc. – while encrypting them at the same time.
In addition, the project eliminates the need for banks and other financial intermediaries to use smart contracts, allowing individuals to easily borrow capital.
Lastly, Centrifuge bridges the gap that currently exists between borrowers and investors by giving them direct access to the DeFi universe, while maintaining a high level of liquidity.
Akala
Acala is a decentralized financial hub built on the Polkadot network, which allows customers to not only use its diverse suite of products, but develop a wide range of financial applications using the platform.
From a functional point of view, the project is packed with several DeFi tools, including a USD pegged stablecoin (AUSD), decentralized exchange (DEX), staking module, and other items.
In addition, Acala provides users with a high level of interoperable cross-chain functionality using a variety of robust security protocols.
Up to this point, the system is compatible with the Ethereum Virtual Machine (EVM) which makes transactions between Polkadot and Ethereum extremely simple.
Steffi
StaFi is one of the first decentralized protocols designed to unlock the liquidity of staking assets. To elaborate, using the platform, customers have the power to stake their Proof of Stake (PoS) tokens – which are essentially “non-tradeable”, as long as they hold “rTokens”. Not in exchange for currency called.
These rTokens can help users earn staking rewards as well as trade the underlying locked staking tokens.
Polkadot’s Status as a DeFi Leader Will Continue to Rise
As the global DeFi ecosystem continues to expand and mature, it stands to reason that investors operating in this space will continue to expand their operational horizons and move towards the use of Polkadot.
This is because the network not only offers extremely quick and economical transactions but also offers a high level of cross-chain compatibility, something that not a lot of networks can boast of.