DeFiChain is a blockchain platform dedicated to bringing the full range of DeFi capabilities to the Bitcoin ecosystem. The network operates on the Proof of Stake/Proof of Work consensus mechanism and further promotes bitcoin’s security by anchoring to the Bitcoin blockchain (via Merkle root) after every few blocks. Not complete Turing, DeFi transactions on DeFiChain happen quickly with low gas and reduce the risk of smart contract errors.
DeFiChain History
The DeFiChain Foundation was founded in November 2019 as a company limited by guarantees – like a platform structure. The organization holds deFiChain brands and domains and ensures that DFI funds are used according to the instructions of the masternodes. The Foundation is tasked with, but not limited to, promoting the ecosystem, recruiting new ecosystem partners, and directing the development of tools for partners in the ecosystem.
The team believes that the cryptocurrency industry is based on a simple premise: People should control their finances. However, existing systems are still far from providing financial services that are actually within the control of those who use them. DeFiChain’s mission is to provide people (and in the future, machines and devices) with seamless access to decentralized financial services, by bringing the full range of DeFi’s capabilities into the Bitcoin ecosystem.
What is DeFiChain?
DeFiChain is a software platform supported by a distributed computer network, dedicated to fast transactions, in addition to it is transparent and accessible to anyone and anywhere.
Specifically, DeFiChain is built to support financial services, such as borrowing, lending, investing, savings, and everything else a commercial bank can do. The difference between DeFiChain and the banking network is that DeFiChain is decentralized .
This means that no agency or organization can control the network, and anyone can participate to run the network’s protocol on their own computer. Running the network’s protocol supports the entire network, and individuals who do so will be rewarded with DFI cryptocurrencies in the form of payments.
Context / Industry
DeFi’s Promises and Challenges
Decentralized finance promises to provide a variety of financial instruments without the need for intermediaries (wo) to ensure that services are trusted. According to the OECD, financial services typically account for 20-30% of total services market revenues and about 20% of gross domestic product in developed economies. This is a huge industry dedicated to one thing: ensuring that financial transactions are trusted. With the advent of blockchain, unreliable systems and smart contracts could be used to replace many of the industry’s functions, significantly increasing the return on investment for individual investors.
Today’s financial services are providing an important service, but at a very high cost and despite the many developments of fintech, the following fundamental problems still exist:
- High Transaction Costs. Due to regulatory requirements, legacy systems with complex problems of interoperability and control of large organizations, transaction fees are high for the average user of banking and financial services. Services that require brokers are even more expensive, as there are agents and other types of intermediaries involved.
- Trading is slow, especially for international transactions. Although theoretically, it only takes a few minutes for the computer to trade, transferring money from one organization to another can take hours in a country and can take days between countries.
- Lack of transparency and unfair advantage for big players. Financial instruments are complex and most people don’t have access to information that allows them to make optimal decisions. Lack of transparency was one of the main factors leading up to the 2008 financial crisis, and in the short term, it always put smaller investors (ordinary people) at a disadvantage compared to institutional investors.
- Inaccessibility or higher costs for those on lower incomes. Financial services are simply not available in many geographic areas, and when this service is available, those on lower incomes are subject to even higher fees (as a percentage) than the average.
Fintech has been trying to solve these problems, with some success. Fintech solutions such as online international transfer services, savings and investment applications as well as mobile money for underserved markets have begun to improve the situation. However, the change is incremental and still builds on a system that essentially requires the costs of agents to provide trust. While it may reduce some costs, fintech is fundamentally unable to address the underlying problems of the lack of transparency as it is dealing with financial instruments the same way and through the same major institutions as traditional finance.
For this reason, many investors have begun to shift their investments to cryptocurrencies. By definition, cryptocurrencies have full transparency that traditional systems cannot provide. Moreover, the number of administrative management and administrative apparatus needed is very small. Most of the activities performed by agents can be written into the code in decentralized financial systems.
Despite the promise of decentralized finance, the technology is still nascent and has many opportunities to create a richer and stronger decentralized financial environment. So far, investors in cryptocurrencies have extremely limited investment options. The promises of peer-to-peer lending platforms, asset encryption, and other types of blockchain have been unable to distribute, be hacked or delivered a lower version than originally promised.
DeFi Status
The current state of Decentralized Finance (DeFi) is popularized by general-purpose blockchains, most of which provide complete Turing command sets for developing smart contracts on the chain. Although suitable for many programming languages, the pursuit of these turing complete smart contract languages has led to many problems when it comes to the scalability, security and robustness of blockchains.
- The sheer volume of dApps on networks such as Ethereum, EOS, and TRON has a potential impact on other dApps on the network. The most obvious example is when CryptoKitties practically caused the Ethereum network to pause. While some networks with faster throughput say this is unlikely to happen, it will be some time before any other network reaches critical application volume on Ethereum so that we can prove whether this is true or not.
- For dApps of the serious financial category, it is important to know that the network is being maintained and managed in a responsible and secure manner. Having a blockchain filled with games, gambling, and other types of applications that are less “important tasks” will ultimately affect the development and direction of the blockchains. With governance models allocating power to masternodes, developer teams, and token holders, the core development team will eventually be influenced by the biggest players.
- Using the complete Turing command requires programmers to create complex programs to develop any type of application. For example, to create a peer-to-peer loan contract on MakerDAO, a programmer requires about 2000 lines of code. Any error in that code could cause loss of money or some other consequence. Maintaining such a large code base essentially means a greater chance of making mistakes and a large attack surface for even simple applications.
The limitations of general-purpose blockchains for DeFi applications have opened up a market opportunity to serve this market. While cryptocurrency momentum continues to grow, most current applications are still using Ethereum. Network concerns have led some major projects to consider moving or working with alternative or additional blockchains.
DeFi Current Issues
- Financial dApps require reliability and do not want to link to blockchains that host applications such as betting, entertainment or other applications that could tarnish the reputation of blockchain at any time.
- The sudden increase in the volume of any dApp on the blockchain could affect all other dApps on that blockchain, in terms of throughput, transaction prices or additional impacts, as seen with CryptoKitties on Ethereum.
- General-purpose blockchains require a large amount of encryption to provide financial services, increasing the risk of hacking or bugs in the code.
Functions that are fundamental requirements for financial services, such as multisig, are often difficult to implement or are missing on general-purpose blockchains. - Maintaining a complete Turing blockchain means that resources are not focused on areas that are highly valued by DeFi applications.
- The governance models of most blockchains today are immature and show signs of politicization, centralization, and uncertainty. Without a formal governance structure, the future of these blockchains is uncertain. Recent discussions about upgrades and forks in both Ethereum and Bitcoin have revealed the immaturity of these systems, and even governance leader Aragon showed vulnerabilities of the governance system on its chain during the 2019 summer vote, where a large “whale” holder of the token changed the results of some last-minute proposed votes. Such vulnerabilities are unacceptable on financial processing blockchains.
- Regulatory standards and regulatory bodies appropriately address the needs of cross-border currencies and financial instruments. Jurisdiction-based regulation and regulation based on legacy technology is failing to meet the needs of the DeFi industry. It is clear that a new legal and regulatory framework is needed to protect the rights of those who use these systems.
- The blockchain industry itself has yet to show the maturity to come up with its own standards bodies that provide best practices or self-regulate in a way that demonstrates the industry’s reliability for decentralized financial applications. So far, efforts to create interoperability or self-regulation have not been ripe and have not led to leadership or standards that can be adopted by international organizations or serious regulatory bodies. The lack of self-regulation makes the industry even more vulnerable to external regulations, making the environment risky for serious investors.
DeFiChain Solutions
DeFiChain is designed for investors in the cryptocurrency market who are looking to make their cryptocurrency work just like any other form of fundraising, so that they can secure a return on investment in any market. DeFiChain is a complete non-Turing dedicated blockchain, specifically designed for the decentralized finance (DeFi) industry. DeFi provides full functionality for this particular segment of the DLT community, sacrificing other types of functionality for simplicity, fast throughput, and security.
Decentralized Lending
Decentralized lending allows individuals, groups to borrow and lend without the intervention of banks. Through mortgage systems, decentralized lending on Ethereum reached more than a quarter of a billion dollars in 2018. All of these systems are ethereum-based, meaning they only settle 15% of the market based on market capitalization.
The main decentralized lending platforms (Compound, Dharma, dYdX and Maker) offer loans with interest rates ranging from 0.5% to 6%. Because everything is managed through smart contracts, the cost to banks is eliminated and platforms can offer much better rates than banks. As these types of decentralized lending services become safer, it is likely that the market will also see an increase in peer-to-peer lending opportunities through dedicated applications.
The power of decentralized lending lies in the efficiency of the existing market by eliminating the intermediaries and managers involved in lending. Moreover, with investors concerned about minimum or even negative interest rates, decentralized lending protects investors from that potential, providing market interest rates while giving borrowers better interest rates than they can get on the current financial markets. Given the magnitude of credit and its role in the entire economy, decentralized lending offers the potential for more loan initiatives based on the open market and favorable conditions. Easier access to lending translates into a faster-growing economy.
The rollout of decentralized lending was initially fully collateralized, and due to the volatility of cryptocurrencies, most platforms require double or more collateral for loans. This allows people to borrow money based on the cryptocurrency they hold. They can manage their cash flow issues without having to sell their crypto assets and at the same time get favorable conditions for the loan.
Decentralized Token Pack
Wrapping allows the use of any digital asset so that the underlying asset is maintained, but it can trade on another blockchain. DeFiChain provides a decentralized package mechanism that allows the owner of crytpoasset to maintain anchoring to the asset and use an unreliable package mechanism that does not rely on any third party as a guarantor for the package or asset. Wrapped tokens can be easily exchanged for the original value on their respective blockchains. Creating tokens wrapped on DeFiChain is a rewarded activity, so there is incentive for crypto holders to create tokens wrapped on the DeFi network as a form of rewarded decentralized financial investment.
Wrapping is a key possibility of DeFi due to the need for interoperability of different cryptocurrencies and assets. So far, there are no standard interoperability standards between different currencies, and the only way to interact between currencies is to use a package or mortgage, which must be provided by a third party. The whole point of decentralization is that people don’t need to trust a competent authority, today it’s the main way that investors can interact between Bitcoin and Ethereum without switching from one coin to another. The Polkadot protocol provides a platform for developing interactive applications, but not specifically for DeFi.
Oracles Decentralized Valuation
DeFiChain will include valuation Oracles to collect data from external blockchains. Oracles are used to collect data such as pricing other cryptocurrencies. Oracles are an important way for blockchains to collect accurate information from both other blockchains and from non-crypto markets.
Joining as an Oracle allows to earn tokens based on the accuracy of the prophets. The built-in oracle function will allow smart contracts to determine the number of oracles, consensus percentages, and parameters to reward oracles for the data they provide.
Oracles are ultimately meant to be decentralized. However, DeFiChain will be launched with some trusted pricing specified sending pricing data from trusted sources to DeFiChain.
Decentralized Exchange
The decentralized exchange function will allow for the atomic exchange of cryptocurrencies in a peer-to-peer fashion. The decentralized exchange function is suitable for everyone to trade directly without having to buy and sell currencies through the exchange. The use of decentralized exchanges reduces the risks associated with the use of exchanges and ensures that the cryptocurrency system does not leave the custody of token holders. It also removes the risk of guardianship from the exchange itself, as the mechanism is peer-to-peer based on the agreed price or at the market price at the time of the exchange.
Transferable Debts and Receivables
DeFiChain will make a series of calls to work with transferable debts and receivables. In the centralized world of finance, debts and receivables can only be managed through financial institutions that process loans. The lack of transparency of these transferable debts was one of the factors that led to the 2008 financial crisis.
For example, Jane’s item factory supplies items to a major automaker, but the automaker pays for those items on a +60 bill basis. Meanwhile, Jane had to pay for materials to produce the items, and of course, regular salaries for her workers monthly or weekly. The car manufacturer would pay the bill, but not in time for Jane to pay all her expenses. Without Defi, Jane needs to go to the bank and pay whatever interest they require, because she has no alternative. The transferable receivables function will allow anyone to provide Jane with a loan based on receivables. Since many may find that the automaker is a low-risk customer and they will pay their bills, anyone who wants to be able to make an offer to Jane at a better rate than the bank, creating a competitive market for debts and receivables based on actual risks and the market’s assessment of the risk. Ro that. Now Jane can get a loan with a high interest rate and the lenders also get great profits from their loan, despite the fact that they only lend this money for 30-60 days.
Blockchain adds transparency to the exchange of debts and loans based on receivables or other types of financial promise. DeFiChain will include the ability for organizations to create smart contracts that allow for simple investments in those assets, so that peer-to-peer loans can be made without the financial institution securing these types of financial assets.
Decentralized Non-Mortgage Debt
In the future, it will be possible to offer non-mortgage loans based on reputation and other factors about borrowers. Through various forms of credentials and records of an individual’s loan and repayment history, non-mortgage-free systems can be developed. Many of the identification solutions under development today are looking at anonymous and pseudonymous reputation reporting systems, based on individual-issued Decentralized Identifiers (DID) and Verifiable Credentials (VCs) issued by reputable agencies to provide information about an individual’s credit history.
The right risk assessment system and reputation will need to be built. While this will take time, perhaps years, it can be foreseen that this type of system could complement or replace today’s credit rating scores. Another potential application of this feature is the ability to create decentralized stablecoins without mortgages. The success of DAI and MakerDAO shows the desire of stablecoins to be pegged, but the high level of mortgages is a factor hindering the creation of more such projects. It is feasible that through market mechanisms and bets, non-mortgage decentralized stablecoins can be created.
Content Encryption
Asset encryption is the representation of an asset, such as real estate or corporate equity, in immutable tokens on the blockchain. This particular decentralized financial sector has tremendous potential and is one of the most exciting investment areas for crypto holders.
Examples of assets that people can now encrypt using blockchain:
- Securities, such as ETF investments, bonds and stocks.
- Shares in private companies.
- Devices that generate energy and income, such as wind turbines, solar farms, satellites.
- Possession of food production materials (new forms of cooperative farms in which non-farmers can own food supplies instead of goods exchanged on the exchange)
- Self-driving cars, vending machines, ATMs, battery shooters and other types of revenue-regulating devices.
- DAO (Distributed Autonomous Organizations).
- Small real estate investment (stocks with term, short-term rental apartments, etc.)
- Large real estate investment (airports, amusement parks, apartment complexes, business areas)
Dividend Distribution
Any crypto asset with a return on investment can use a dividend distribution module to create smart contracts that automatically pay a return on investment. Using DeFiChain will allow for a leap in dividend delivery functionality. It is possible to implement models similar to today, in which payments are made weekly, monthly or quarterly or models in which payments are made daily, hourly or even by the minute.
For example, today, city governments can issue bonds to invest in a wind turbine to provide electricity. The government will take care of everything and repay the bond on schedule. With the distribution of dividends, the community can buy wind turbines directly and distribute dividends to investors in wind turbines. Instead of having to go through the management required by the centralized regulator (the government), every citizen wants to be able to invest in that wind turbine and dividends will be paid depending on each person’s contribution to that investment. Eliminating costs and distributing profits fairly will be the main benefits for the wind turbine ownership community.
DeFiChain Design
Design Parameters
Strong and Secure
Bitcoin Core is the longest-running and most powerful blockchain in the world. It has operated without interruption since the block began in January 2009. Furthermore, from a security standpoint, the Bitcoin core has proven itself to be the most secure blockchain without any security incidents, while ensuring the highest-valued cryptocurrency asset in the world, which is Bitcoin (BTC). Since writing this article, Bitcoin Core has successfully defended cryptocurrency assets worth $150 billion, or 68% of the cryptocurrency asset market capitalization.
The proven security and robustness of Bitcoin Core has made it the blockchain of choice for the DeFiChain facility for expansion. DeFiChain is built on a fork of Bitcoin Core 0.18, namely v0.18.1. DeFiChain will be written in C++ and the plan is to use other languages, such as Rust, in the future. Although DeFiChain is a new blockchain, based on Bitcoin Core fork will create an easily integrated chain for Bitcoin-enabled exchanges and applications.
Fast and Scalable
One of the proven disadvantages of the Bitcoin blockchain is the sluggishness of transactions on the chain. Moreover, scalability has become an issue as the number of blocks on the chain increases.
To deploy a blockchain with the speed and scalability needed, Bitcoin Core’s DeFiChain fork will include the following improvements:
- Block time: 30 seconds
- Block size: 16 MB
These improvements provide transaction speeds of more than 2,200 transactions per second (tps) while maintaining manageable bandwidth and computer requirements to enable DeFiChain’s decentralized operations.
Decentralized Consensus Mechanism
Bitcoin Core is using Proof-of-Work (PoW) as a consensus mechanism. DeFiChain takes advantage of the best aspects of PoW, which is to use the ID hash of the zoned button to create blocks while focusing much of the consensus on proof-of-stake (PoS). A major improvement in the PoW mechanism for DeFiChain is that the betting buttons can run without investing in high-end servers and ultra-fast bandwidth connections. As a result, DeFiChain is creating the potential for faster and easier decentralization of mode and infrastructure ownership.
Incomplete Smart Contract
Decentralized financial transactions are made through smart contracts. For example, to ensure that the borrower repays the lender, smart contracts implement the loan conditions in the code. To develop smart contracts, DeFiChain will add opcode support to decentralized financial guidance sets. Opcode DeFi complements and interacts with the Script script language of the existing Bitcoin Core protocol. The DeFi scripting language is called Recipe, which denotes the role of language in describing and enabling decentralized financial contracts.
Immutable Through Block Anchoring
DeFiChain aims to maintain decentralized quality while maintaining immutability. To do so, DeFiChain will anchor its block to the Bitcoin blockchain after each few blocks. This further enhances the immutability of DeFiChain without any effect on the decentralized nature of the chain.
Consensus Algorithm
Proof of Stake
DeFiChain uses a Proof-of-Stake (PoS) algorithm similar to Bitcoin Core’s original Proof-of-Work (PoW) mining algorithm. While DeFiChain is choosing PoS over PoW, at the same time, DeFi technology retains the best technologies that have been tested and proven to have been developed in the Bitcoin Core blockchain.
Masternodes to Stakes
To run a masternode, distributors must keep a fixed amount of DFI, which was originally set at 20,000. Masternode on DeFiChain participates in the process of active transaction authentication and block creation. The bet amount is intended to be lowered along with the stability and maturity of the blockchain to encourage further decentralization.
Each bet button can only perform 1 hash per second, with the Bitcoin Core PoW algorithm replaced by the staker’s masternode ID. A new block is mined if it satisfies the following conditions:
SHA256({staker’s UTXO}, {current timestamp, in seconds}, {stake modifier}) < {target}
The anglers check this request every second. If the block condition is smaller than the current target, then the block creators will assemble and sign a new block. Staker’s UTXO requires 20 confirmations before it can be accepted as a stake.
Share Modification Tools
A share modification tool is a composite source of random entropy. Without a share modification tool, the future PoS kernel will be entirely predictable. A good stock modification tool needs to be unpredictable or incapable of influencing by bettors. DeFiChain’s staker modification tool is set to: SHA256({previous stake modifier}, {masternode ID}).
Authenticate Future and Past Titles
Unlike PoW, block title authentication requires a share table. The titles are verified in batches before the full blocks are downloaded, so the bet board is used to verify future shares.
In order to be able to verify future titles, blockchain needs to apply an additional rule, so any changes to the share database are recorded immediately, but only take effect after 300 blocks. Therefore, any node can verify any block title compared to its current stake, if the block title is no further than in the future (or in the past) more than 300 blocks.
Nothing at Stake Protection
For PoS blockchains, there is no limit to the number of conflicting blocks a distributor can sign. Therefore, distributors can bet on every possible branch or branch, which undermines the finality of the PoS blockchain. This problem is called a double sign and cannot occur in PoW blockchains, where miners cannot exploit all possible branches without the possibility of mining. In PoW, this represents an intrinsic economic penalty. However, PoS blockchains cannot apply an inherent economic penalty for signing conflicting blocks on different branches.
DFI Token
DFI is the original cryptocurrency of the DeFiChain network. The network enables the creation and issuance of digital currencies or tokens, from tokens representing U.S. dollars, stocks, corporate dividends, certificates of ownership to real-world assets, etc.
These tokens circulate the network as non-native tokens. However, DFI is a single cryptocurrency in the DeFiChain network used to pay for token transfers, token creation, voting, lending, offering collateral to borrow and bet on – more information about this will be available later.
Conclusions section
The most notable is DeFiChain DEX, a decentralized token exchange, which is fully operational with thousands of participants to buy, sell, swap, borrow, lend, lend and bet various tokens on the DeFi ecosystem.
A notable rival of DeFiChain DEX is Uniswap, which is built on Ethereum. Uniswap’s main weakness is that it must comply with the limitations of the Ethereum network. On the other hand, DeFiChain DEX is practically infinite in this respect.
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