Finance is a decentralized network of computers, as opposed to a central server known as decentralized finance (DeFi). DeFi, the emerging digital financial infrastructure, will do away with the need for a central bank or government agency to approve financial transactions.
Ether, Ethereum’s native cryptocurrency, is used to pay transaction costs on the Ethereum network.
How Does DeFi Work
DeFi uses blockchain technology, a distributed ledger that records and keeps track of all transaction information. The system frees people from the shackles of financial institutions and their monopolies on banking, trading, and other related activities. Users of DeFi, a trustless network, have full authority over their finances and are not reliant on any external authentication services.
DApps conduct all blockchain business. The blockchain relies on the connections between its users to verify the authenticity of the transactions recorded there. Users’ devices contribute their processing power to verify transactions on a Proof-of-Work blockchain. Proof-of-Stake blockchains use staking to verify transactions.
Get to know about other Blockchain-related concepts like web3 real estate solutions, Real Estate Transactions, and many more.
2023 Predictions for Crypto and DeFi
- First, the possibility of a DeFi Summer 2.0 in 2023 has been raised in the crypto community. Also, by 2023, the UX DeFi will undoubtedly have improved.
- This means that if in 2022 we saw the testing, strengthening, and improvement of DeFi protocols, with more streamlined user experiences, more robust use cases, and DeFi applications that are easier to use than home banking applications, then the following year will likely see the way to user onboarding.
- Protodanksharding (EIP-4844) will bring better scalability and a step toward more scalable L2 and Ethereum Verge, and EIP-4337 will abstract accounts and make wallets easier to use, both of which are important for protecting users’ anonymity.
- Additionally, there will likely be a meteoric rise in the number of cryptocurrency wallets available to the general public. The widespread adoption of digital wallets is largely attributable to the increased education provided by integrating major social media companies.
- For example, to interact with the Reddit NFT avatar, users have created nearly 3 million cryptocurrency wallets. In November, Instagram will release its official NFT wallet, which could eventually be used by 2 billion people. It has also been suggested that Twitter, with its 300 million users, may add its own cryptocurrency wallet.
DeFi Projects To Watch In 2023
As the cryptocurrency market prepares for its next bull run, 2023 will be a pivotal year for decentralized finance projects. Though 2022 hasn’t been kind to crypto or DeFi, with prices plummeting and several high-profile projects collapsing, the general consensus is that things can only improve from here.
1) AllianceBlock
AllianceBlock is more than just a protocol; it’s the developer of a full-fledged DeFi infrastructure platform that serves not only those who want to borrow, lend, and stake cryptocurrency but also those working on DeFi projects themselves. In addition to providing access to a wide range of decentralized investment opportunities, it also provides a trustless KYC/AML and identity verification system, compliant peer-to-peer and NFT services, regulatory compliance across borders, and an API for accessing both on-chain and off-chain investment data.
2) Aave
With good reason, Aave has become one of the most well-known and respected brands in the DeFi industry. Starting in 2018, Aave has become one of the most trusted DeFi platforms by providing a secure place for users to lend and borrow cryptocurrencies and physical assets directly from one another.
3) Orbs
Orbs Network is improving DeFi’s infrastructure layer. Orbs is an open, distributed blockchain infrastructure that speeds up DeFi applications across blockchains.
Orbs integrates with Ethereum and Polygon to improve DeFi.
It creates a tiered infrastructure stack for DeFi, allowing distributed applications to use Orbs’ execution services.
4) Cake DeFi
Every person who uses DeFi wishes they could have their cake and eat it, too. Cake DeFi’s mission is to satisfy investors’ desire for high returns with minimal risk.
Cake DeFi, headquartered in Singapore, is a core DeFi platform that provides staking, lending, and liquidity mining services to cryptocurrency investors in exchange for a passive income stream. The DFI token fuels the DeFi blockchain ecosystem (itself a Bitcoin blockchain fork).
5) Uniswap
Uniswap, one of the largest and most well-known DEXs, can recover most DeFi investors. Uniswap users can trade cryptocurrencies safely and easily, with lower fees than a centralised exchange. By placing tokens in liquidity pools, users can earn interest on their holdings passively.
To determine to price and carry out trades, Uniswap employs an AMM model built on top of smart contracts. This means there is no centralized authority controlling the platform.
