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One of the biggest obstacles for people with a great idea, when it comes to entering the space of decentralized finance (DeFi), is the lack of technical knowledge. Decentralized ledgers are a relatively recent addition to the technological world, and finding a reliable developer is both difficult and costly, as many of them are already working with a steady project. But if this obstacle were removed, or at least mitigated, the space would have the opportunity to flourish and entice a number of participants who would otherwise not spare a second thought for such an idea.
Why Is DeFi Rapidly Gaining Popularity?
According to Defipulse, a total of USD 9.1 billion are currently locked in this exciting new sphere that has become the buzzword of the year. But why is it so important? It all boils down to accessibility. Traditional finance markets have strict legal requirements participants must meet in order to ensure safety, whereas most of the features of blockchain — immutability, transparency, decentralization — remove the need for such precautions. In the case of traditional finance, the space has become increasingly exclusionary under the guise of security and high barriers of entry, but no such limitations exist in the case of DeFi.
The initial idea of Bitcoin, and many subsequent cryptocurrencies, was to be your own bank. But as many already know, banks provide much more than just storage for your funds. But purchasing financial instruments through traditional means entails fees and added costs, which simply do not exist in DeFi because blockchain needs no middleman thanks to its inherently trustless nature. Nowadays, the sheer amount of interest in the nascent space has led to its explosive growth and it is showing no signs of stopping.
Intro to Dfinance
Dfinance is an infrastructure upon which DeFi ideas come to be born into products. In other words, they provide the basis for up-and-coming projects, with in-depth explanations for every step of the way. Dfinance takes away the stress of understanding the technical complexities behind blockchain, decentralized technology, and smart contracts, offering an intuitive and easy-to-use platform that almost anyone can use, provided they have the financial knowledge. Put simply: you provide the idea, they provide the tools.
Dfinance is based in Zug, Switzerland, one of Europe’s blockchain hotspots, and belongs to the Wings Stiftung which developed the WINGS DAO protocol. WINGS DAO, in turn, is a decentralized forecasting platform for conducting due diligence and price discovery, based on the Ethereum network which is slowly morphing into Dfinance due to lack of ICOs, which were their first use case. Dfinance itself is a layer-2 solution, meaning it is not based on its own blockchain, instead filling the role of a new protocol (mostly for improving previously known issues) on an existing blockchain, such as Ethereum in the case of Dfinance.
How Dfinance Expands the DeFi Space
As of right now, to add your own DeFi instrument to the market, you need to have both a financial and a technical background. The former is not too rare, as most of the rules surrounding instruments have not changed beyond recognition — just switching to a decentralized type — but the latter is relatively rare, so the whole sphere still has a high entry barrier. With a solution to act as a bridge between financially savvy would-be participants and the DeFi space, the whole industry stands to gain more than can be estimated with any certainty.
The possibilities are vast. Aside from simply building your own financial instruments through their high-level language (which effectively takes your written “commands” and translates them into programs, understanding the sentences like they were code), you can also use the company’s built-in decentralized exchange (DEX) to trade that instrument, browse other available options, and get in touch with other creators with similar ideas.
Diving Deep into the Tech
But just because Dfinance works hard to bring the technology closer to the people doesn’t mean there is nothing under the hood here. In fact, enabling such a high-level language that can be used by virtually anyone is no small feat, and they’ve achieved it through the Move language, which was initially developed as a foundation for the Libra blockchain. This means that developers who know what they’re doing can use this tool to build low-level modules for building their own instruments that are as specific as they want them to be.
On a more general note, like any decentralized system, Dfinance also has to use a consensus algorithm for network-wide decisions, no matter their size or significance. Theirs is based on the Tendermint Proof of Stake, often referred to as consensus without mining (as it is not as computationally heavy as Bitcoin’s Proof of Work, for example). There is also the so-called PegZone, a Cosmos-specific term referring to a feature enabling cross-chain interoperability. And finally, since Dfinance needs data from outside the blockchain to be able to generate financial instruments, this is supplied by decentralized oracles, or nodes that are incentivized to translate the data so that it can be read by smart contracts.
What’s Next for Dfinance?
Before it takes the world of DeFi by storm, Dfinance still needs to release their testnet (several versions of which are already out). To encourage users to stick with them, they intend to add incentives especially focusing on education and onboarding assistance, according to a blog post.
As of the time of writing, the swap between the WINGS token and the XFI (the Dfinance coin ticker) is about to begin. The entirety of the WINGS supply — a total of 100,000,000 WINGS — are swappable over a period of 182 days, starting September 7th, 2020. The swap rate starts at 1:1, meaning you get one XFI coin for one WINGS token, but will decrease by 1/182 each day until it reaches zero. In other words, users who immediately go through with the swap will receive slightly more XFI coins than those who wait.
All in all, Dfinance is already well on its way to reimagine DeFi without the existing limitations, which users hope will help expand the space, ushering a new era into the oft-archaic world of finance.