Algorand and DeFi
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The hype behind Algorand is real and well deserved. This is a project that is building the best features never seen in the space before and solving the major problems facing cryptocurrency and blockchain.
Algorand is a decentralized blockchain with the main aim of enabling a limitless economy by developing sophisticated platforms for blockchain.
The idea behind Algorand’s development is creating a public blockchain, one that offers everyone a boundless and viable opportunity. Algorand is developed to address one of the biggest obstacles of blockchain, through developing scalable and fast cryptocurrency networks without sacrificing decentralization.
In this article, we will be discussing how Algorand empowers its network with the capabilities of Decentralized Finance (DeFi).
Decentralized Finance (DeFi)
The primary aim of cryptocurrency which is storing, sending, and receiving payments has long been considered an alternative to banks. However, retail banks go beyond storing, sending, and receiving payments.
They offer other financial benefits like obtaining loans, shares, etc, hence the need for blockchain developers to come up with a scheme that beats the bank to their game, and this development birthed Decentralized Finance (DeFi).
DeFi refers to financial services built on blockchains and smart contracts, with the ownership and usage of the system dispersed among several different parties.
Just as how bitcoin developed the first digital currency, DeFi developers are seeking to restructure the banking system by creating a decentralized financial system that provides services such as investment, lending, stablecoins, exchanges, etc.
DeFi continues to attract significant worldwide popularity starting last year and has grown rapidly since then, with Ethereum worth over $700 million locked up in DeFi applications today.
DeFi is rendering all financial connections fully decentralized with users retaining total control of their assets and engaging with the system via peer-to-peer (P2P), decentralized applications (DApps). This eliminates the major disadvantages of transacting with centralized services that lack transparency and accountability.
Importance of Decentralized Finance (DeFi)
All through the crypto sector, the dominant route for users to obtain exposure to products and services was by centralized exchanges.
Users wanting to obtain exposure to trading services must pass through the procedure of opening an account and providing their details. Also, they must relinquish possession of their assets and risk losing them in case of a network attack.
With numerous prominent hacks and confidence issues that have been witnessed throughout the years, DeFi seeks to provide users with an easy solution by erasing the need for a third party.
This is accomplished by developing services in a transparent, non-permitting, and decentralized fashion using smart contracts.
Furthermore, no intermediaries or arbitrators are required for DeFi applications. The code represents the settlement of any potential conflict, and users are always in control of their funds. This decreases the cost of providing and using crypto services and enables a more decentralized financial system.
Errors are eliminated as new financial services are implemented on blockchains. Data is stored on the blockchain and distributed across thousands of nodes, which makes censorship or a service’s potential shutdown difficult to occur.
Another important benefit of having a decentralized ecosystem is accessibility for users who may not have exposure to any financial services.
Because the mainstream financial structure depends on the profit-making of intermediaries, their services are usually not for low-income communities. With DeFi, though, the costs involved are drastically reduced, so low-income users may often benefit from a wider range of financial resources.
DeFi’s Enhancement on the Algorand Network
Algorand offers an excellent platform for developing DeFi applications with its open-source, decentralized, scalable, and permissionless network. It is the first to use Pure Proof-Of-Stake protocol in the history of blockchain, with features like Layer-1 (On-chain) & Layer-2 (Off-Chain) smart contract options, Atomic Transfers, and Standard Asset tokenization.
Several projects and enterprises have been looking into Algorand’s development and decided to explore the solution DeFi provides through it. Some of those projects include:
Props: The first Regulation A+ consumer token qualified by the Security Exchange Commission with over 3 million users is a network that is designed to reward application users with a financial stake for their contributions.
Applications leverage Props tokens to improve their users’ engagement, and appropriately interact with them. Props reduce the technological and regulatory difficulty normally identified with tokens on the blockchain. It does this with a compilation of APIs that can be quickly utilized by developers to render the token interface transparent to users.
PropsChain is leveraging on Algorand to sustain the increasing volume of activity on its PropsChain and offer increased transparency for network participants. The public chain of Algorand will increase the speed and reliability of Props while increasing the volume of transactions (scalability) and also provide a higher level of security.
Verady: The Company that happens to be a top Legible cryptocurrency tax and accounting Software that provides automated accounting.
Verady is extending its services to the Algorand blockchain. They aim to integrate ALGO into its software and ensure integrated accounting for every holder of the ALGO token on the Algorand network, while also increasing the set of digital financial products and services available to Algorand users.
Monerium: A financial technology company to make digital currencies easily available, safe, and easy to transact online. The company is the first and only corporation allowed to issue regulated electronic money on blockchains.
Businesses and individuals can store and send programmable digital currency online using e-money issued by Monerium without having to go through financial institutions and other payment processors.
Monerium extended its support and services to the Algorand blockchain, attempting to leverage its easy regulatory compliance technology.
Tether: The first-ever stablecoin in the crypto space which was designed to disrupt the traditional financial system and provide a more pragmatic alternative to money. Through introducing fiat money-digital cash into the Bitcoin and Ethereum blockchains. Tether provides a significant solution to the monetary system by merging the advantages of digital currency and that of traditional currency.
Tether has integrated its network in the Algorand blockchain and Algorand users can be able to enjoy the benefits of the stablecoin whilst experiencing speed, scalability, and decentralization of the Algorand network.
Particularly, Tether is utilizing a key feature of the Algorand 2.0 upgrade, the Algorand Standard Asset (ASA) technology, which enables issuance and tokenization of any type of assets on the Algorand blockchain.
RHOVIT: A gamified content network that focuses on providing simple and inexpensive crypto-mining, while at the same time creating a better method of monetization for content creators.
RHOVIT has scaled its business by building on Algorand and its high standard blockchain technology. They stand to gain from the scalability benefits of the Algorand blockchain, as well as quality innovation to develop tools and innovative methods for users to mine and earn.
We are currently in an era of a decentralized and borderless economy and the basis for this modern revolution is Algorand as it is the very first blockchain to offer users an instant procession of transactions. It won’t be a bad idea to bring your DeFi related solutions on Algorand and explore many of these fabulous features that its blockchain possesses.
I hope you find this article useful and I’ll be excited to see what other use cases you can solve using the Algorand platform, feel free to point it out in the comment section below so that we know about it as well. Also, kindly leave the question(s) you may have concerning the topic area.
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Article Written by Helen IMAH – Algorand Ambassador