There are so many DeFi projects and tokens starting now changing how funds are managed. It is an open-source, permissionless, transparent, and trust-less system without any intermediaries. Some of the famous DeFi projects are Uniswap, Compound, Aave, and MakerDAO. Though DeFi Open finance development is at an early stage, it needs a lot of improvements to integrate smoothly with different real-world applications.
The major services offered by a Decentralized Finance (DeFi) Development Company are
- Facilitating easy access to lending and borrowing for debtors and creditors.
- Provision of insurance for various purposes.
- Stablecoin development by collateralizing cryptocurrencies, fiats and commodities.
- Tokenization of different assets.
- Creation of synthetic assets.
- Enabling DEX trading for investors.
- Asset management.
- Formulation of different derivative protocols.
The benefits offered by DeFi Smart Contract Development are
- It is highly interoperable with different DApps and tokens.
- There is no central entity for monitoring and controlling the operations of the firm.
- There is no need for carrying out KYC (Know Your Customer) or checking the credit scores of each investor on the platform.
- Anyone with a smartphone and a strong internet connection can access DeFi without any restrictions enabling borderless access sans barriers.
- It works in a non-custodial manner as users have complete control over their funds or assets.
- High-end security is provided through decentralization ensuring no chance of any scams or hacking attacks to take place.
- It is immutable and no changes can be made to the data of the users by anyone anytime.
The various applications of DeFi Open Finance Development
- Borrowing and lending – With a huge number of people in the need for availing credit, DeFi permits users to take a loan without having a bank account or submitting any application. The smart contract bridges the gap between the borrower and the lender and connects like-minded parties saving time. The interest rate will be calculated according to the demand and supply conditions in the market. Many DeFi apps offer a fixed interest rate on loans.
- Asset management – You can act as the sole custodian of your crypto assets. There are many multi-signature crypto wallets in the market like MetaMask, Gnosis, and Argent where you can buy, sell, and transfer your cryptocurrencies seamlessly. Private keys or passwords can be used for accessing your assets anytime without any hindrance.
- Gaming – Ethereum-based games are becoming popular for the use cases of DeFi. Most of the games revolve around gambling, betting, and virtual pets. Players will be held accountable for their own actions while the open-source blockchain network minimizes the chances of fraud ensuring fairness and transparency in the system. CryptoKitties is one of the famous DeFi games. The rewards will be distributed by issuing tokens and lottery tickets to gamers.
- Identity management – DeFi can help in associating user rights and restrictions by establishing unique identities. It gives access to a true economic system. Though open access is allowed, top-notch privacy of personal information will be ensured.
- Insurance – Owing to risks and uncertainty related to bugs and breaches in smart contracts, taking insurance has become a necessity rather than a luxury for business firms. Insurance assists users in buying coverage for their assets and protects their holdings from any sort of misuse. The insurance risk can be pooled together by sharing it among multiple users simultaneously.
- Predictive markets – It can be used to determine the outcome of future events which includes decentralized insurance and on-chains that are fully automated. They can be used for insuring the bugs present in a smart contract. A popular example would be Augur, a DeFI protocol which features prediction markets, sports games, world events, and election results on its platform. It facilitates peer to peer unlimited betting with trading in ETH and USD.
- Stablecoin development – It will be pegged to any stable asset like fiat currency, gold or non-volatile cryptocurrencies. It can be used for different purposes like lending and borrowing, remittance payments, and also for creating institutional applications like a Central Bank Digital Currency (CBDC). More than 200 stablecoins have been created on the Ethereum blockchain network alone.
- Synthetic assets – They act as crypto assets that offer exposure to other assets like gold, cryptocurrencies and fiat currencies. They are collateralized by tokens locked into Ethereum-based smart contracts consisting of in-built agreements and incentives. They over-collateralize the assets of users helping the derivatives trading network to absorb price shocks.
- Tokenization of assets – Tokens are digital assets that can be transferred securely between different users. It unlocks various economic possibilities as users can store and trade values across the globe.
The other use-cases of DeFi are payments, data analytics, trading, wallet development, and education. A defi development company will have to face challenges before witnessing mass adoption in the form of managing the price volatility of cryptos, availability of fiat on-ramps, scalability, high gas costs, the problem of over-collateralization, and vulnerability in the smart contracts. It is a step forward for the growing Fintech industry and makes cross-border transactions easy and faster. It will create an effortless and open financial system soon ensuring high transparency and security.