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Decentralized finance (DeFi) has been the latest buzzword in the crypto industry for some time now, and is growing steadily.
DeFi is financial instruments in the form of services and applications built on the blockchain. The main task of decentralized finance is to become an alternative to the banking sector and replace the traditional technologies of the current financial system with open source protocols. That is, open access to decentralized lending and new investment platforms for a large number of people. And let them receive passive income from crypto assets, as well as save on fees for transfers, loans and deposits.
The argument for decentralized finance (DeFi) has been made even more pressing by allegations of misuse of funds against a centrally controlled cryptocurrency.
Noting the high potential of DeFi, the Radix team is currently working hard on its DeFi solution that will take DeFi technology to the next level.
DeFi advantages and disadvantages
Despite the fact that the decentralized application sector is just developing, there are already quite a few benefits. The main thing is that any user can get one or another financial service, for example, lending, bypassing the bank. Decentralized landing protocols minimize risks and open access to borrowed funds 24/7. New products are especially relevant for borrowers from countries with expensive bank loans.
The procedure for creating your own digital asset and its introduction to the market has become noticeably easier and has become available to almost everyone. Payment processing does not last for several days, but a maximum of a couple of hours, interest rates and commissions have become much lower. Also, users have new ways to make money on cryptocurrency.
For developers, the simplicity of creating applications becomes a clear advantage due to transparency and open source, in addition, projects in the decentralized finance sector can be developed on any platform that interacts with smart contracts.
Of course, DeFi is not without its drawbacks:
1. Since most DeFi projects are built on the Ethereum platform, they are not very suitable for high-frequency trading as they are limited in terms of scalability.
2. Due to sharp jumps in the load on the Ethereum network, transaction fees can rise sharply, making high-frequency trading less affordable.
3. Poor security. There is a known case of a project called Bancor that used to rely on an authorization contract type to handle ERC20. However, there was an error in the contract that allowed the contract to transfer tokens from the user's wallet to any address specified by the hacker after the user was authorized, resulting in the loss of nearly $ 100,000.
4. Not friendly to developers.
How will Radix make Defi better?
The radix team is currently working hard to offer the best DeFi platform, addressing the above DeFi disadvantages on the Ethereum platform and offering:
1. Better safety:
Reducing the number of hacks, exploits and failures of smart contract applications. This became possible thanks to The Radix form of smart contracts, Components.
2. Build DeFi dApps faster
This is made possible by the Component Catalog. This technology is a register of already released components Components in the Catalog are like inactive templates or blueprints that anyone may use to create multiple active Components patterned after the original in the Catalog. It will make application development much easier and faster
3. Development of a decentralized developer community
The best platform Defi requires a strong developer community. Therefore Radix offers the Developer Royalty System program. The essence of this program is that developers can set royalties for using the components they create. Royalty payments are based on the actual utility that the Component brings to the network.
4. Unlimited scalability.
Radix uses build technologies for unlimited scalability without compromising security, decentralization, or composability. This is made possible thanks to the unique Cerberus consensus algorithm developed by the Radix team. Cerberus is a new consensus algorithm designed specifically for large, diverse networks of simultaneous applications and transactions.
Unlimited scalability will make transaction fees cheap.
Summing up the above, we can conclude that DeFi technology is very promising and necessary. However, at the moment it is at an early stage of development and has a number of problems, including those related to the Ethereum network. Radix's DeFi solution aims to eliminate them and make DeFi technology better.
Learn more about Radix:
Website: https://www.radixdlt.com/
Twitter: https://twitter.com/RadixDLT
Telegram: https://t.me/radix_dlt