Good day Professor @reminiscence01, and all other Steemians. This is my first Beginners' Dynamic task, and sadly, it is in the last week of this season. I hope we are given at least one more season because I have longed to participate in these dynamic tasks for some time now.
In the lecture, we were taught on the basics of DeFi, and we have been given an assignment to complete and submit with the following questions:
- a) In your own words, explain DeFi products and how it is shaping the present-day finance.
b) Explain the benefits of DeFi products to crypto users.
- Discuss any DEX project built on the following network.
- Binance Smart Chain
- Tron Blockchain
3. In the DEX projects mentioned in question 2, give a detailed illustration of how to swap cryptocurrencies by swapping any crypto asset of your choice. Show proof of transaction from block explorer. (Screenshots needed)
This is my submission for the assignment.
In your own words, explain DeFi products and how it is shaping the present-day finance.
DeFi is an acronym for Decentralized Finance, which is an innovation made possible through the use of blockchain technology.
As we all know, one of the major aims of Satoshi Nakamoto, in the founding of Bitcoin and the bitcoin blockchain, was the decentralization of finance. Through the use of blockchain technology, individuals can now access financial assets, now known as cryptocurrency, without the need for a centralised authority or middleman. Individuals remain in full control of their assets, and can choose to do with it whatever they wish. This is the whole point of decentralization and autonomy.
Decentralized Finance (DeFi) products bring this dream closer to reality, and make this possibility easier for individuals to access. These products/applications make use of smart contracts on smart contract-enabled blockchains to provide totally decentralized finance options, including but not limited to, lending, exchange etc. to their users, keeping them in control and eliminating the middleman, offering a more secure and transparent system.
DeFi applications are decentralized applications (dApps) which run via the use of smart contracts, which are programs that execute "if-then" statements, exactly as programmed. The smart contract technology started with the Ethereum blockchain, but has since been adapted within other blockchains including Tron, Steem, Binance Smart Chain, amongst others. There are currently hundreds of defi projects on these blockchains and the entire ecosystem has received massive traction since the beginning of this year, 2021.
Some examples of DeFi Applications include:
Explain the benefits of DeFi products to crypto users.
There are quite a number of benefits to the use of decentralized finance applications. Since the year began, many people have begun using them, and have brought even more people to the knowledge of them, due to these benefits that they enjoy from the use of these projects. Here are some of the key benefits:
- Complete autonomy i.e. Total control over one's assets. Decentralized finance applications, through the use of the blockchain cryptography technology, give their users complete control over their assets on the platform.
- Increased security. Due to the fact that the system is decentralized, the users are completely in charge of their information. This implies that no central authority has the key to their information, hence they can remain safe if they make sure to safeguard their information.
- Transparency. DeFi applications run peer-to-peer systems and each transaction carried out can be viewed on the blockchain.
- Open Access. Anyone can make use of Defi applications providing their personal information. This makes it accessible to anyone and everyone who has access to the internet and a smartphone or laptop. They are also open 24/7.
- Low Transaction cost.
- High Transaction speeds.
- Users of some of these DeFi applications can earn passive income by providing liquidity to them through "staking" or "farming" their cryptocurrency assets for interest.
- One can transact large amounts of money without any need for permission from a centralized authority.
Discuss any DEX project built on the following network.
Binance Smart Chain
There are quite a number of DeFi products on the Binance Smart Chain, but because we will be required to conduct a transaction on it, i will discuss one which i am most familiar with - PancakeSwap.
PancakeSwap is one of the most used DeFi products on the Binance Smart Chain, and in general, as can be seen by its TVL (Total Value Locked) being over $11 Billion, and having over 2.8 million users. It is an AMM (Automated Market Maker) model Decentralized Exchange (DEX) platform where traders can exchange cryptocurrency assets directly with one another through the help of permissionless liquidity pools and without the use of a centralized order book.
Seeing as it exists on the Binance Smart Chain, it is used to swap tokens available on the Binance Smart Chain i.e. BEP20 tokens. There exists a fee to carry out the swap transactions, and this fee is paid in BNB, the native cryptocurrency coin of the Binance Smart Chain. The Liquidity reserve of PancakeSwap is provided through the funds of users, who deposit their assets in exchange for LP (Liquidity Provider) tokens, and the chance to earn some passive income through commission from fees paid by users of the DEX.
Some of the major features of PancakeSwap include:
Trade/Swap: This is the major function of the DEX. As stated above, it offers the users the opportunity to swap BEP20 tokens on the Binance Smart Chain by paying a certain amount of BNB as a fee for carrying out the transactions. Many traders like to use PancakeSwap due to its relatively low transaction fees.
Staking: Users are given the opportunity to stake the dApp's cryptocurrency token - CAKE for a promised amount of interest. These tokens are staked in what they refer to as Syrup Pools. By staking their assets, they lock them up for an agreed period of time, and eventually get them back at the end of the time period with a reward of some interest, which can be in the form of CAKE tokens or some other BEP20 tokens.
Farming: This is done by users providing their cryptocurrency assets to the Liquidity pool and in turn receiving LP tokens, which grant them the ability to earn rewards of a certain amount of interest over a period of time.
Lottery: One can also play a lottery on the PancakeSwap platform. The platform holds a lottery four times each day, where users can participate in the hope to get lucky and receive a huge reward.
NFT market: PancakeSwap also has an NFT market where one can purchase various NFTs with their BNB coin.
The native cryptocurrency of the PancakeSwap project is CAKE.
For the Tron Blockchain, i will be discussing JustSwap because it is the defi application i am most familiar with on the Tron Blockchain, although quite a number exist.
JustSwap is the most used DEX on the Tron blockchain with a TVL of over $1.5 Billion. It was launched in August 2020, and has seen a lot of adoption since then due to its user friendliness and ease of use. It is also an AMM model DEX, making use of liquidity reserves provided by the users to provide other users with the opportunity to trade their TRC20 tokens for other TRC20 tokens on the Tron blockchain. It is a very fast, easy to use, and low transaction cost DEX.
JustSwap makes use of two lists of tokens that can be swapped on the platform - the JustSwap Default of 19 tokens, and the Tron Alliance of 53 tokens. It also gives users the ability to search for the token contract of their preferred token, if it isn't among the aforementioned tokens in the lists, and exchange them provided they have enough liquidity to. It also is compatible with a number of Tron blockchain Wrapped tokens.
Some of the functions of the JustSwap DEX include:
Swap: As explained above, one can swap their owned TRC20 tokens for other TRC20 tokens of their choice, provided there is sufficient liquidity for the trade to be executed.
Pool: With the Pool we can create LP tokens by staking some amount of the assets we wish to stake to create liquidity for. We can then stake these LP tokens in the LP Pools for profit in the form of interest.
There is no cryptocurrency token native to the JustSwap dApp.
In the DEX projects mentioned in question 2, give a detailed illustration of how to swap cryptocurrencies by swapping any crypto asset of your choice. Show proof of transaction from block explorer. (Screenshots needed)
For this i will be demonstrating how to swap TRX for SUN token on the JustSwap platform on my mobile TronLink Pro wallet.
- In my TronLink Pro wallet, i click the Discover icon at the bottom of the home page.
- This takes me to a page where i can search for and make use of dApps. I click on JustSwap to take me to the JustSwap platform.
- Once on the JustSwap platform, i select which coins i want to swap, and how much. After doing that i click on Swap.
- The system then takes me through the process of swapping the tokens.
- The tokens have been successfully swapped.
To view this transaction on the block explorer, we will take the hash of the transaction, and search for it on the TronScan block explorer.
- I go to TronScan
- I input the hash of the transaction into the search bar
- These are the transactions details.
As we can see, the transaction failed due to lack of energy.
This was an interesting task to undertake, and the lecture really opened me up to DeFi in a different way. In this task, i have talked about DeFi and its benefits and features, highlighting PancakeSwap on the Binance Smart Chain, and JustSwap on the Tron blockchain as examples. I hope you found this work enlightening! Ciao!
-IamEl the ModestPoet
N/B: All pictures not cited, were designed by me using Canva, powerpoint, or gotten from the respective websites or applications.