Cryptocurrency (Mar 10, 2021 09:30AM ET)
How decentralized finance is transforming the future of banking
The outbreak of the novel coronavirus at the beginning of last year completely altered many financial predictions. With lockdown restrictions enforced globally, many assets were failing, and investors turned to traditional safe havens for investing. While Brent crude oil, for example, dipped to an all-time low price of -$40/barrel, gold, a popular investment safe haven, crossed the elusive $2000 mark and recorded a new all-time high price. Bitcoin and many other crypto assets have crossed their all-time highs and are looking to increase with every passing day.
For blockchain enthusiasts, the pandemic period has been nothing short of surpassing expectations and has been likened to the much-talked-about “bull run” of 2017. The most exciting aspect for some, and I’m sure many would agree, has been decentralized finance (DeFi). By disrupting financial intermediaries and allowing users to control their finance, DeFi brings traditional banking services like saving, investing, borrowing, and lending to blockchain technology.
Although DeFi has been around for some years, the seeming shift to digital assets and the new financial solutions in DeFi have sparked up tremendous new interests in DeFi. From a total value locked of less than $1b in January 2020, the total value locked (TVL) in DeFi contracts is now more than $40b. Besides the typical financial services now available at many fingertips, the popularization of yield farming strategies and liquidity pools is mostly responsible for the DeFi boom.
Yield farmingYield farming is essentially an aspect of DeFi that involves “putting cryptocurrency to work.” Using different protocols that often revolve around locking up cryptocurrencies (usually stablecoins) and moving crypto assets in different liquidity pools, yield farmers exploit the best performing strategies to maximize their annual percentage yields (APYs).
The yield farming frenzy can all be traced to the COMP governance token distribution in June 2020. Compound started rewarding both lenders and borrowers using the Compound application with their governance token and subsequently set a trend that could well be the birth of yield farming. In summary, in what is quite similar to staking, yield farming usually involves earning from lending and borrowing.
Liquidity in DeFi and Wanswap protocolThe core principle of decentralized finance and, most especially, yield farming is providing liquidity. Using liquidity pools(LPs), lending, staking, and locking up crypto assets, different DeFi protocols have grown enormously in rewarding users of their protocols. Projects like Uniswap and Sushiswap are top DeFi protocols contributing mainly to the growth of the network.
Wanswap is a multiplatform, fully decentralized exchange with automated market-making (AMM), and it is modeled after Uniswap and Sushiswap, however, on the Wanchain blockchain. The Wanchain blockchain is a fully decentralized permissionless ecosystem that grants users a unique and secure approach for interoperability.
With the Wanchain ecosystem, users have a wide range of options with staking, specifically on three nodes, a Validator node, Storeman node, and staking in Hive on Wanswap protocol. APYs on the three staking options range from 8-13% or a collective share of 1000 Wan per week.
Wanswap provides the full package of DeFi in liquidity pools and Compounding (lending). With liquidity pools, users also have a couple of options in mining pairs and APYs vary a lot. Wanchain’s compounding dApp equally grants users an opportunity to earn from lending and borrowing with no risk of liquidation if they avoid using deposited funds as collateral.
Undoubtedly, DeFi is rapidly surpassing expectations and defying interest rates in mainstream finance. Although there have been debates over the sustainability of decentralized finance, especially Yield Farming protocols, there’s no denying how enormous investments have thrived in the past few months. Overall, old and new protocols sustain the ecosystem, and DeFi may well be the future.