Understanding the Decentralized Finance Ecosystem: Part 2 Top DeFi Projects – Bitcoin & Crypto Guide – Altcoin Buzz

In Part 1 of this series, we explained the basics of Decentralized Finance (DeFi). We also evaluated its difference from the traditional financial systems and discussed how they will change the future. In this Part, we will review the top DeFi projects across segments.

A quick recap of the different DeFi segments:

0x is an open protocol that enables the peer-to-peer exchange of assets on the Ethereum blockchain. Anyone in the world can use 0x to service a wide variety of markets ranging from gaming items to financial instruments to assets that could have never existed before.

0x boasts of the following numbers: Total Transactions: 713K, Total Volume: $750M, Total Projects: 30+

Popular projects which are already using 0x Protocol include dYdX, Gods Unchained, etc.

Paxos Standard (PAX) considers itself a digital dollar. Just like other crypto assets, it can move instantaneously, anywhere in the world, any time of any day, and its programmable. It is USD-pegged (1:1). The funds are carefully protected, audited and regulated.

PAX boasts of the following numbers: Total PAX transacted ~ $ 60.7 Bn, Total PAX minted ~ $ 1.2 Bn

PAX is a programmable token that can participate in the larger global community of tokens, helping create a global platform for programmable money with stability.

Maker comprises a decentralized stable coin, collateral loans, and community governance. Its product, Dai (DAI) is a stable and decentralized currency. It allows businesses and individuals to realize the advantages of digital money without experiencing volatility. Maker (MKR) is the governance token for the Dai Credit System. MKR holders have the important responsibility of making decisions around the risk that will impact the future of the system.

Anyone who has collateral assets can leverage them to generate DAI on the Maker Platform. This can be done through Makers unique smart contracts known as Collateralized Debt Positions (CDP). These CDPs hold collateral assets deposited by a user and permit this user to generate DAI. But, generating DAI also accrues debt. This debt effectively locks the deposited collateral assets inside the CDP until it is later covered by paying back an equivalent amount of DAI. At this point, the owner can again withdraw their collateral.

When the user wants to retrieve their collateral, they have to pay off the debt in the CDP. They will also have to pay a stability fee, which they have continuously accrued on the debt over time. It is paid in MKR (or DAI if using the CDP Portal UI).

Lending through Collateralized Debt Position is MakerDaos game-changer. It is still a work in progress and will be made more effective in the coming days.

Bob needs a loan, so he decides to generate 100 DAI. He locks an amount of ETH worth significantly more than 100 DAI into a CDP and uses it to generate 100 DAI. The 100 DAI is instantly sent directly to his Ethereum account. Assuming that the stability fee is 1% per year, Bob will need 101 DAI to cover the CDP if he decides to retrieve his ETH one year later.

From MakerDao s website.

Read more here: Top 5 Working Cryptocurrency Projects With Great Token Utility

Augur is a trustless, decentralized oracle and peer to peer protocol for prediction markets. It is deployed on the Ethereum blockchain. Augur forecasts the results of different events basing on the Wisdom of the Crowd Principle (large groups aggregated answers are often superior to the answer given by any of the individuals in the group).

Augurs decentralized oracle system has the ability to identify the truth of an incident. This is Augurs ultimate innovation. So Augur produces honest predictions about the future and reports of what has already occurred and the present state of the world.

Augur markets follow a four-stage progression:

A user can ask a specific question about a real-world event in the future. Trading begins immediately after the market creation, and all users are free to trade on any market. Market creators will receive an Augur coin (REP) encouragement from the fees for buying shares. After the event, on which the market is based, has occurred, its outcome is determined by Augurs oracle. Then, traders can close out their positions and collect their payouts.

In a Decentralized Prediction Market (DPM) theres no operator! A market actor or a group of actors stand to gain millions or even billions by manipulating an outcome and claiming that Y occurred when in fact X was the true outcome. This is The Oracle Problem.

Augur uses an incentivized communal resolution system. Market outcomes undergo a resolution process whereby participants can dispute outcomes by placing a financial stake. Those who stake on the accurate outcome, or more precisely, on the outcome that the market ultimately resolves to, win an additional stake. Those who report inaccurate outcomes lose their stakes. This incentivizes honest reporting.

Reporters use Reputation (REP) during market dispute phases of Augur. REP holders must perform work, in the form of staking their REP on correct outcomes, to receive a portion of the market settlement fees. If s/he does not report correctly, s/he does not get the fees and loses REP. Also, if s/he does not participate in a fork (when the network has a very large dispute over an outcome), s/he loses 5% of his REP. Passive holders of REP who dont use the coinwithin the Augur protocol to stake on disputes and forks are penalized.

Launched in 2018, Harbors mission is to power the future of crypto-securities. For this, it wants to build a decentralized compliance protocol that standardizes the way securities are issued and traded on blockchains. The platform streamlines the alternative investment experience for investors, issuers and their placement agents. It unlocks liquidity options for traditionally illiquid assets.

Do read our detailed articles on Security Tokens:

Understanding Security Tokens Part 1

Understanding Security Tokens Part 2

SelfKey is an identity system built on an open platform consisting of several key components including

Selfkey introduces a concept called Self-Sovereign IDentity (SSID). This concept of Self Sovereign Digital Identity is similar to the way we store and manage our non-digital identities today. Currently, most of us keep identity documents such as passports and birth certificates or utility bills at our homes safely, securely, under our own control. Self-sovereign identity in SelfKey is the digital equivalent of what most of us already do with our physical identity documents.

References: We have heavily referred to the official websites of individual projects.