DeFi (Decentralized Finance) is the great movement of the financial market and economy from a centralized system to a decentralized system like the blockchain.
In Cryptocurrency terms, it can be given as a Crypto ecosystem consisting of financial apps equipped to Carry on blockchain platforms. In recent times the bull has been going on with an increase in BTC as well as ETH but a more significant increase has been seen when it comes to DeFi coins and tokens. As traders and hodlers have seen a good percentage margin some of which are: 1000% and even above in just two months.
For the success and prosperity of these DeFi tokens, they need a good backbone and this is where Algorand can come into play as a suitable Blockchain for DeFi.
Algorand is the world’s first open-source, permissionless blockchain with a pure proof of stake protocol.
The Algorand blockchain comprises of outstanding features such as:
- Atomic Transfers
- Standard asset tokenization
- Layer-1 (on-chain) and Layer-2 (off-chain) smart contract options.
The Defi (Decentralized Finance) environment to some degree is restricted.
The majority of them are created on Layer 2 of Blockchain. This generally makes them not user friendly and hard to disclose or understand to newbies. The User Experience (UX design) additionally goes a long way from ideal. Also, another thing to be bothered about is that when being conveyed or carried on another Blockchain (serving as an alternate layer) as their parent BlockChain they will, in general, lose the security they ought to uphold as well as decentralization that is the fundamentals of every Blockchain and the core reason behind every Blockchain.
So as to genuinely acquire a borderless economy, DeFi solutions should be created with the equivalent internal properties of their parent platform for in a case that they don’t, they would consistently be tested by centralized solutions who would give a more amicable and friendly onboarding to users.
Algorand’s Layer 1 platform comprises of two revolutionary solutions which introduced a year ago and these are:
1. The generation of new fungible tokens
2. The execution of atomic multi-party transfers (AMPTs).
The invention of these solutions being built at the layer one level of the Algorand blockchain and this pertains to be a sort of great change seen in Blockchain technology.
This can be explained as being part of the consensus protocol that keeps hold of the unique and original characteristics to which Blockchain is built and developed. And these are in line with Algorand’s Pure Proof of Stake (Security, Scalability, Decentralization, Finality, and Speed).
Finance comprises multiple bits. Networking is related to liquidity, price arbitrage, and lower interest rate, and these can’t be separated.
For Defi to be recognized and accepted by the world a speedy and scalability system is required. And these can’t be achieved with Proof of Work alone. Algorand’s Blockchain can provide Defi systems without losing security and decentralization.
With this, you can see that Algorand is a good platform design for Defi solutions.