The world of Decentralized Finance is always rapidly evolving, making it quite possibly the most vibrant sector of blockchain technology. New products always come out much faster than most people can keep up. The problem is it tends to create the risk of crowding out effects from otherwise mind-boggling projects.
Despite the immense competition, several notable DeFi technological innovations stand head above shoulders over the rest. They promise to completely restructure how everyone approaches and does several common or essential activities. The article is dedicated to such DeFi trends worth observing. Read on to find out.
Self Repaying Loans
Since blockchain was created as a currency and with finance in mind, it is pretty fitting to bring out one of the most promising Fintech innovations. And that repaying loans sounds very mouth-watering. They’d probably make the world much better if they went viral.
So how do self-repaying loans work? Well, one takes out such a loan using their deposits as collateral. The yields generated from the same deposits are then utilized to refinish the loan. It’s quite an exciting feature.
To enjoy such features, one out first to join a capital deposits protocol, Alchemix being a good example. Doing so allows one to take quick loans of up to 50% of their deposits.
With 50% of deposits acting as collateral, the other 50% utilizes the yielding nature of high returns on cryptos. The loan value is guaranteed to always be on the downward trend, with there hardly being any threat of the collateral being liquidated.
The world is getting more connected to the internet. Smartphones are switching from being a luxury to more of a necessity. Yet, an increasingly connected world has always been viewed as entirely beneficial to a handful of firms colloquially known as the big tech. They’re the largest and most dominant technology majors based in the US and China and control most global data and content.
But not if Web 3.0 has something to say about it. The innovation incorporates blockchain-based technology like decentralization and tokenomics to completely overhaul how data is handled. With decentralized processes of data interaction, data privacy, security (from 3rd party advertisers), and scalability are guaranteed to users.
The tokenomics end is built to expand the financial sector exponentially. It would incorporate financial assets into the inner workings of all actions taken on the internet via tokenization. That would translate to the truly universal adoption of blockchain.
Back to the internet topic, the metaverse is another interesting emerging trend that could transform humanity’s future. It can be defined as a world of interactive 3D virtual worlds that are interconnected to form a parallel world from the one we know.
The meta world would have everything present in the physical world and much more. It will be where dreams become a reality, from building entire cities to riding fire-breathing dragons. All this is in an immersive display designed to be as realistic as possible.
Metaverse is heavily based on Web 3.0 and decentralized interactions, bypassing centralized internet providers. It translates to heavily reduced downtime that is conducive to high-resolution virtual worlds. Every party has been jumping onto its bandwagon, from Facebook, which even renamed its parent company, Meta, to the militaries of the world’s leading superpowers.
Everyone dreams of making it big in life, and huge wealth is a good indicator. If the world’s wealthiest individuals are anything to go by, such options are no longer in brick motor ventures. The key lies in derivatives, options, and either stocks or cryptos.
But what if both could be done at the same time? Well, that’s where synthetic stocks come in. They utilize something like Terra’s mirror protocol to, as the name implies, mirror stocks on the stock exchange market. It becomes possible for one to trade in, say, a synthetic Walmart stock.
Synthetic stocks are designed to mirror every price movement of an asset. They are a tokenized derivative of the underlying stock asset with an algorithmic price tracking system to enable the mirror of the stock’s prices. But rather than being tradeable on a stock exchange, their trading occurs on blockchain, thanks to DeFi.
They merge the best of both derivatives’ worlds. The high market capitalization and lower price volatility come from the stock markets, making them a long preferred investment option.
A lack of interoperability is one of the largest hindrances to blockchain’s universal adoption. A token or crypto from one blockchain can’t be used in another. It’s a problem similar to government-issued fiat currencies, which are plagued by jurisdictional boundaries.
While Fiat money has to contend with possibly lengthy negotiations from otherwise adamant governments, cryptos have crypto bridges. Crypto bridges give users the ability to make cross-chain transfers. That is, directly sending crypto assets from one blockchain to another is useful when capitalizing on price movements fast or accessing dApps on the other blockchain.
They come in two forms, trustless crypto bridges,s which utilize smart contracts and trading algorithms to make peer-to-peer transfers. Their counterparts are trusted crypto bridges that function using a centralized arbitrator for transaction custody.
While many other notable DeFi technology trends are coming up, the above five arguably have the most potential to disrupt markets completely. They either offer exceptional services such as self-repaying loans, synthetic stocks, and crypto bridges or offer to change norms like Web 3.0 and Metaverse completely.
The innovations are,e however, very young and need a lot of teething and fine-tuning. Some are still largely concepts, even though they currently receive much attention and finance. Once they get of age and are implemented, they could forever change crypto adoption trends. They’re worth observing.
What is Decentralized Finance?
Decentralized finance is a new concept in which individuals are able to borrow money in exchange for digital assets instead of conventional currencies like dollars, euros or pounds. The advantage of decentralized finance is that borrowers do not need to be connected to banks or any financial institution. They only need to connect to other users who want to lend them funds through an app.
What is the Metaverse?
The metaverse is what we call “the next big thing” after the internet. As technology continues to advance, the dream of virtual reality (VR), augmented reality (AR), and mixed reality (MR) becomes a reality. This new digital realm allows for seamless human interaction between humans and artificial intelligence (AI). VR headsets like Oculus Rift and HTC Vive allow users to experience and interact with these technologies.
What is Web 3.0?