Next-generation protocols eliminate financial barriers for DeFi and NFT

Next-generation protocols eliminate financial barriers for DeFi and NFT

Blockchain technology has become a revolutionary force for change on the world stage over the past decade, as Bitcoin has evolved into a recognized form of legal tender by governments of countries such as El Salvador.

Although the applications of distributed ledger technology (DLT) are extensive and widespread, its potential to change the configuration of the global financial industry offers perhaps the most transformative opportunities in a world where more than 1.7 billion adults are classified as not covered by banking services.

The creation of secure first-level blockchain protocols capable of hosting smart contracts, such as Ethereum, led to the emergence of decentralized finance (DeFi), and the explosion of popularity of non-interchangeable tokens (NFT). But their popularity has doubled, as the wider use of leading networks has led to a sharp increase in transaction costs and a slowdown in processing.

Many supporters of some first-and second-generation protocols, including Bitcoin and Ethereum, often assure that developers have made significant progress in solving these recurring problems, but the fact that the same problems continue to arise during each bull market suggests that the new generation of blockchain protocols offer the best solution to these long-standing difficulties.

Some of the new blockchains have become more widespread in recent months as a suitable alternative to Ethereum, due to their inclusiveness and ease of connection. Thanks to multi-level solutions, users who can’t afford hundreds of dollars for each transaction can now start using blockchain and DeFi.

Decentralized finance

The rapidly expanding world of DeFi is single-handedly changing the global financial infrastructure, as all types of stocks, securities and transferable assets are slowly but surely tokenized and stored in digital wallets.

New protocols are emerging every day that allow anyone with an Internet connection or a smartphone to access ecosystems that are equivalent to digital savings accounts, but offer much more attractive returns than in the traditional banking sector.

Unfortunately, with most of the leading DeFi protocols currently running on the Ethereum blockchain, the high cost of conducting transactions on the network has led to an underestimation of the capabilities of ordinary people. These are people who live in countries where even a $5 transaction fee is a significant amount of money that can feed a family for a week.

This is where competing new blockchain platforms have the greatest opportunities for growth and adoption, thanks to inter-network bridges, a growing number of revenue opportunities from new DeFi protocols and significantly lower transaction costs.

Non-interchangeable Tokens (NFT)

The popularity of the NFT sector has increased dramatically along with prices, as all sorts of celebrities, sports stars and world-famous brands have begun to offer unique digital technologies and collectibles.

As during the bull market of 2017-2018, digital collectibles from CryptoKitties to CryptoPunks broke records both in terms of prices paid, network congestion and commissions received.

Games for earning money have also become popular applications, as NFT technology allows players to sell in-game items for real money.

This is another use case in which there is a surge of interest in new solutions. Their almost free transaction capabilities have allowed users from even the most economically disadvantaged regions of the world unlimited access to protocols that can allow them to make money.

Instead of paying over $100 for Ethereum gas just to try to participate in the NFT action, users can instead invest their money in building their NFT portfolios, and participating in the growing metaverse of digital collectibles.

Reasons for working with DeFi

DeFi creates a banking system that is open to everyone, decentralized, transparent and secure.

Everyone, from giants such as Tesla, Square and Microstrategy, to small traders, place bets on blockchain projects. And why not? For eleven years, the cryptocurrency market has grown exponentially, and according to it has reached a market capitalization of almost two trillion dollars.

Blockchain technology is used not only to create cryptocurrencies or tokens. Companies such as Amazon, IBM, Google and others use the main cryptocurrency technology-blockchain, to improve their IT services.

Another misconception is that cryptocurrencies are used only as a means of exchange. Well, thanks to DeF, the technology has provided all the financial services that you can imagine, whether it is lending, borrowing, payment or derivatives on the blockchain.

Decentralized finance or DeFi is a term used for financial applications built on the basis of blockchains using smart contracts. These are self-executing programs in a block chain that are pre-programmed to launch certain functions after certain conditions are met.

Think of DeFi as an alternative to the traditional financial infrastructure created using blockchain technology with such advantages:

  • Decentralized, secure and transparent

No central authority controls DeFi applications. Instead, DeFi applications are managed by smart contracts, which are open for everyone to check and study. In addition, you can participate in the process of managing DeFi applications by voting for the platform’s proposals.

In short, the DeFi space is transparent and managed by people in the community, like you, who participate in it.

From cryptography to secure data storage, DeFi inherits all the security features from the advanced blockchain technology. In addition, the smart contract code also exists in the chain of blocks.

There is no denying that smart contracts can be faulty and lead to theft. To avoid this, use DeFi applications with smart contracts that are checked by well-known independent auditors.

  • DeFi gives you full control over your assets

Traditional financial services are tightly controlled by the central authorities that manage them. However, such solutions have many disadvantages, such as high fees for intermediaries, low transaction latency, entry barriers, and much more. The most important thing is that with traditional financial services, you have less control over your money.

On the other hand, DeFi excludes intermediaries from financial services, and offers you full control over your assets.

  • DeFi offers a wide range of financial services that are open to everyone

The main reason for the massive spread of DeFi is its ability to provide simpler financial services without borders. DeFi applications extend to a range of financial services, such as payments, decentralized exchanges, stablecoins supported by stable fiat assets such as the US dollar, lending, borrowing, forecasting markets, insurance, derivatives, crop cultivation and much more.

Every day, something new is being created in the DeFi space.

For example, how to get a loan from a bank? You submit tons of documents and go through complex procedures, right? In the DeFi space, it is easy to get a loan. You make a deposit, and your loan will be credited to your crypto wallet.

In short, DeFi is limitless. Everyone has access to financial services in the world of DeFi. There is no such entry barrier in DeFi as in traditional finance. You don’t need documents, a bank account or even a credit rating. All you need is an internet connection and a crypto wallet.

Most importantly, DeFi applications are open source. Anyone can view the basic code of the smart contract in which these applications are running. You can not only view their source code, but also use it to create your own DeFi applications. Thanks to this layout, DeFi applications are called “money lego”. You can combine DeFi applications to create a unique financial service.

  • DeFi can become a tool for combating corruption and monopoly

Unlike traditional financial systems, DeFi applications are managed by the people who use them. The approval of any proposal requires the consent of the majority. In addition, as already mentioned, DeFi applications are publicly available, and anyone can verify their transactions. Thus, there is no place for corruption in the DeFi space.

Besides, there is no monopoly. Why? Because the main code is open to everyone.

  • The advantage of early entry

Despite the fact that the first projects in the DeFi space were started a couple of years ago, the world of DeFi is still in its infancy. Mass adoption is still far away. Given the rapid growth of DeFi, users will make huge profits in the future if they manage to get into DeFi before they become ubiquitous.

Fast forward to 2021. There are hundreds of applications in the DeFi space, the total blocked value of which (TVL) is currently more than $50 billion. This is exponential growth in any market.

Like all technologies, blockchain continues to develop

Those who were at the dawn of the Internet could hardly imagine the journey that came from using programs like Netscape to explore some of the earliest bulletin boards or chat with friends. This has transformed into the current vast digital universe, which is an interweaving of social networks and search engines on Google.

Just as many of these early programs that once dominated the digital landscape have now completely disappeared, so many popular first-and second-generation blockchain protocols will suffer the same fate. New networks with excellent scaling capabilities and smart contract functionality will win the market’s location.

These are new projects that offer cheaper transactions and a higher degree of scalability. They have every opportunity to take a step forward and take a leading role in attracting the general public, paving the way for the future of blockchain.

The dawn of the blockchain era has already begun, and projects such as Bitcoin and Ethereum have helped open the door and make blockchain technology a driving force for change on the planet.