DeFi, or decentralized finance, is the use of technology to remove the intermediates used in financial transactions. Financial transactions are an integral part of our daily lives, and of course it is not new to use technology for financial services.
However, the technology makes transactions easier and does not completely eliminate the need for an intermediate product. This is why decentralized funding is critical as it puts technology at the heart of financial services transactions. For this purpose Defi uses public blockchains and software protocols.
Decentralized finance aims to decentralize traditional financial services such as lending, investing, payment, trading, and asset management. This report aims to shed light on Augur, Compound Finance and Uniswap V3 and try to analyze their role in strengthening the DeFi space.
It is a decentralized exchange that enables transparent access to the market. Augur is a global predictive marker protocol that anyone can use to create a market. It is based on Ethereum and allows users to bet on the outcomes of world events.
Before the start of Augur, the prediction market was highly centralized and also limited within geographic boundaries. This would have required the use of a trusted third party to manage the funds and verify the results of the events. This is where Augur enables global participation by removing boundaries and the need for a middleman. The smart contracts in Augur manage users’ funds and payouts.
Augur also has its native token called REP, which currently stands at $ 24.14 with a market ranking of 137. Reporters bet the REP on the truthful result after an event, and the result with the most REP bet is considered the truthful result. If a user sets the REP to an incorrect result, the set tokens are redistributed among the users.
Augur v2 was recently launched to address UX and market making. It has market making tools with improved liquidity and faster orders, as well as mobile user interfaces.
Uniswap v3 was launched on May 5, 2021 with the aim of being the high-performance version of the Uniswap protocol. It offers better execution for traders, concentrated liquidity, unparalleled capital efficiency and superior infrastructure at DeFi. The aim is to increase the flexibility for the provision of liquidity by the market maker for the record. Uniswap is the decentralized protocol for the automated provision of liquidity. Version 3 makes the functionality of automated market makers even more efficient.
To make the functionality of AMM more efficient, the concentrated liquidity allows users to lend funds to the liquidity providers and define a band for trading their deposits. In the usual scenario, traders pay a small fee for every trade they make from AMM pools, which is shared by all depositors of the pools. In this case, a significant part of the liquidity remains unused. However, the concentrated liquidity in Uniswap v3 solves this problem by making it possible to lend funds to a pool called LP (Liquidity Providers).
Compound interest financing
It is a cryptocurrency borrowing and borrowing protocol that is completely decentralized. Here the users can borrow the cryptos as collateral for the loan of the crypto assets against interest. Technically, compound finance is an algorithmic money market protocol.
Compound interest financing has literally dominated the defi area since its inception as it makes the process of borrowing and earning interest relatively simple. With compound finance, people can earn the interest instantly by delivering the assets to the liquidity pool. Most interestingly, interest rates adjust based on supply and demand.
This also makes the process very user friendly as you can repay or withdraw your collateral at any time. With compound finance, you really don’t have to deposit the money in a bank. Instead, you can get a smart contract. This way, intermediaries have no control over your assets and make the process of depositing collateral and earning interest more accessible.
COMP is the platform’s governance token and is currently trading at $ 386.87 after falling nearly 16% in 24 hours.
Defi is indeed an industry that is currently developing its infrastructure and it will take time to develop the DeFi space. The decentralization of funding not only secures the funds, but also makes access to financial services user-friendly.