The growth of the decentralized finance (DeFi) industry has been a recurring headline throughout 2021 and to date hundreds of billions of dollars in crypto assets are locked onto protocols on many blockchain networks and report a return to their holders.
What started out as a simple Ethereum-based exchange interface that allowed ERC-20 tokens to be traded in a decentralized way, called Uniswap, exploded into a vast ecosystem filled with decentralized exchanges, yield farms, protocols. loan and staking platforms.
As development continues and old protocols become established, new projects have emerged to incorporate more elements of the traditional financial realm into the DeFi arena as digital technology slowly transforms the system. global financial.
Here are some ways for users to get involved in DeFi beyond just putting in cash pools or depositing into a loan protocol.
Decentralized trading of derivatives
Cryptocurrency derivatives exchanges have long been a target for regulators, and once provocative exchanges like BitMEX and Binance have found themselves bending to the will of the law and changing their operating practices as they sought a more legitimate position.
This reinforced the need for crypto traders to have a decentralized option and led to the creation of protocols like dYdX and Hegic, which offer similar services without the target which is a centralized structure for future regulators.
DYdX is a non-custodial perpetual trading platform built on a layer two protocol that runs on the Ethereum network and gives users up to ten times the access to futures contracts for over twenty cryptocurrencies.
Hegic is a chain options trading protocol that uses hedging contracts and liquidity pools to offer option contracts with a term of up to 90 days that can be paid in Ether (ETH), Wrapped Bitcoin (WBTC) or USD Coin (USDC).
The maximum holding period for options on Hegic has been lowered from 90 to 30 days. All previously vested options are unaffected by this change.
The maximum. period will be adjusted according to the current volatility in order to protect the active LPs against too cheap theft sale. pic.twitter.com/JiVBVH5xD2
– Hegic (@HegicOptions) September 8, 2021
Both of these platforms provide users with access to these advanced trading products without the need to disclose their identity, as required on centralized counterparties.
Ultra-high link, rebase and APY tokens
One topic that comes up more and more in financial discussions is the concept of creating a decentralized reserve currency that is free from the control of any government or centralized financial institution.
Olympus aims to address this issue through a Decentralized Autonomous Organization (DAO) platform that features staking and various bond offerings, including the ability to tie Ether, MakerDAO (DAI), Liquidity USD (LUSD) ) and Frax (FRAX).
– OlympusDAO (@OlympusDAO) September 22, 2021
The surety process on Olympus is essentially a cross between a fixed income product, a futures contract and an option. Bonders receive a quote outlining the terms of a transaction at a future date and include a predetermined amount of the protocol’s native OHM token that the bonder will receive once the vesting period is over.
The funds raised by the bond offerings are paid into Olympus treasury as collateral to support the OHM tokens that have been issued, thus helping to provide the underlying value of the OHM token that allows it to be used. as reserve currency or medium of exchange.
The only other projects that have a cash flow that provides the underlying value of each token are Stablecoins, but as the name suggests, their price is fixed as the price of the OHM can rise, providing a new avenue. performance for users.
Once linked, users can sell their OHMs on the open market or stake them on the Olympus protocol for a current yield of 7299%.
Related: CFTC Renewed: What Biden’s New Agency Chooses For Crypto Regulation
Participation in participatory loan on Polkadot and Kusama
Another way for cryptocurrency holders to put their assets to profit while helping the cryptocurrency ecosystem grow is to participate in the parachain auctions in the Polkadot and Kusama ecosystems through a process. known as an equity loan.
In the auction process, different projects compete for one of the limited slots of parachains that connect the project directly to the Kusma or Polkadot mainnet, facilitating the interconnection of all parachains in the ecosystem.
With crowdloans, users who hold native KSM and DOT tokens can ‘contribute’ them to the pool that a project uses to secure a parachain location, and they will have their tokens returned after a specified lockout or bind period that can last for up to one year.
Running #Kusama statistics on participatory loans:
~ 995k $ KSM contributed to 16 projects
☛ ~ 88% (~ 875k $ KSM) contributed to the 5 main projects, i.e. ~ 175k $ KSM on average so far.
☛ This 88% is equivalent to approximately 78% of KSM contributed to the first 5 parchains.
These auctions are a huge success!
– Fabs (@fabsbags) September 21, 2021
In return for their contribution and their inability to earn wagering rewards during the token blocking period, users are given a specified number of tokens for the new protocol which can then be used in the ecosystem or sold in the marketplace.
This approach offers a less risky return opportunity for token holders, as all major contributions are blocked in a smart contract and returned after the stipulated blocking period. And by the nature of the parachain auction process, there have been well-developed projects with larger communities that have been granted parachain locations, increasing the chances that their tokens will maintain or increase in value as long as protocol development remains. active.
Aside from the threat of regulation, the DeFi ecosystem shows little sign of slowing down its integration of the best parts of the traditional financial system and developing innovative protocols that level the playing field for retail investors.
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