DeFiChain's Hard Fork Makes Decentralized Assets Lucrative for Millions of People

With the latest update, DeFiChain now supports decentralized loans and assets. The DeFi protocol aims to provide fierce competition to the traditional financial market.

DeFiChain emerged from a Bitcoin hard fork two years ago to build the world of decentralized finance as a Layer 2 solution on top of the ecosystem of the mother of all cryptocurrencies. Now, the DeFi protocol went live on November 15 with a new update called Fort Canning.

While asset to kens are not uncharted territory for many crypto enthusiasts, there are DeFiChain some differences to the traditional providers. Namely, while the latter set up the asset token feature as a dApp on the blockchain, the applications on DeFiChain are natively anchored at the consensus mechanism level. DeFiChain therefore works entirely without smart contracts or a virtual machine to implement DeFi applications. This reduces the smart contract risk – the danger of decentralized systems being tricked – to a minimum.

In doing so, the protocol’s strategy is guided by “reverse engineering” – improving existing applications and programming them natively within an ecosystem to reduce the attack surface. DeFiChain has its own decentralized exchange, offers its users the ability to do liquidity mining and staking, and with its latest update opens the doors to the world of decentralized assets and loans.

Share trading in the crypto age

In this regard, the implementation of decentralized assets offers the opportunity to democratize the traditional trading of securities. This makes it possible for anyone with internet access to invest in synthetic assets in a completely decentralized manner. Requirements such as a bank account or access to a broker are no longer necessary.

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Such a decentralized asset represents a token on the blockchain that is linked to the value of the “real” asset. This type of replication of an asset is also called a synthetic asset. Ultimately, users invest in a kind of replica of the asset and thus do not acquire a direct stake in the respective company. However, this also means that the tokens are not considered securities and are tax-free in many countries after a one-year holding period.

U-Zyn Chua, DeFiChain Co-Founder, announced that the hard fork “enables one of the most significant use cases in smart-contract-less DeFi: decentralized tokenization and decentralized credit.” Further, he explained that this will allow crypto users to “tokenize assets using BTC and DFI (DeFiChain’s native token) without a central party for the first time.” This, he said, has the advantage of allowing users to “generate cash flow while holding long positions in cryptocurrencies.”

How do you generate cash flow with decentralized assets?

For decentralized token trading to be possible at all, a so-called liquidity pool is needed. This enables indirect trading of various Assets in which the users trade with the respective pool and not directly with each other. Such a pool always contains the currency pairs needed for a trade transaction. For example, one could deposit a stablecoin like dUSD (DeFiChain’s decentralized dollar stablecoin) into a pool and take out a Tesla stock token in return.

To ensure a certain level of liquidity in a pool, a process called liquidity mining is used. In this process, users are responsible for ensuring the required trading liquidity in a pool.

The liquidity in the pool acts as a middleman for the decentralized transactions. In return, users have the opportunity to receive rewards for their “credits”, which consist of transaction fees and mining rewards. These are still very high, especially in the initial phase. Unlike traditional stock trading, this allows customers to benefit not only from price gains, but also from rewards.

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Ultimately, DeFiChain tries to create a lucrative alternative to the traditional financial industry. This is because in addition to liquidity mining rewards, small investors can also buy just fractions of classic assets such as stocks and profit from price gains. Even in regions where bank accounts are not the norm in society, decentralized loans and assets offer enormous potential.

More information on how exactly trading decentralized assets on DeFiChain works can be found here.

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