Decentralised Finance (DeFi) – democratising financial services with Symbol
At NEM we recognise the growing importance of DeFi in blockchain and for the wider financial services industry, and we are actively exploring ways in which we can support our partners to take advantage of the exciting possibilities DeFi presents.
What is DeFi?
DeFi is one of the fastest growing sectors of blockchain technology, with much of the excitement based on the ability to provide access to a whole range of financial products and services, to individuals and businesses around the world, who have been previously overlooked by mainstream financial institutions.
DeFi provides an alternative to traditional financial systems, through products ranging from borrowing and lending, insurance and investments.
The ethos of DeFi is to address the current limitations and failings of centralized financial institutions. There are a number of areas where DeFi can potentially be superior to the legacy systems which center around the elimination of middlemen, single points of failure, corruption, and fees.
DeFi is both decentralised and permissionless, giving access with nearly no barriers to entry, removing the need for onerous permissions or to open traditional accounts and significantly levelling the playing field by allowing everyone to participate.
DeFi products and services are currently built almost exclusively on Ethereum, thanks in large part to its smart contracts. These remove the need for middlemen and paperwork, but smart contracts are also fixed and cannot be changed, creating a lack of flexibility.
Combined with the very real cost and speed related scalability issues that come with building on Ethereum it is not surprising that the market is looking at alternatives as a smart solution to these challenges that need to be overcome if DeFi is to truly achieve its potential.
Why Symbol is perfectly positioned to help drive DeFi adoption
There are currently 3 main barriers to full adoption for organisations seeking to participate in DeFi:
Symbol can provide significantly more transaction throughput to help cater to the significant volume of DeFi users, from individuals to small businesses.
Because Symbol is a hybrid of both public and private blockchain, and it is designed for solutions to help enterprises avoid unnecessary cost and complexity, Symbol can help to avoid the poorly-scaling high fees of Ethereum smart contracts.
With its plugin-based business functions, Symbol is tested and instantly usable, making it easy to build quickly and cost effectively.
Using Symbol will help to overcome the scalability challenge that can be experienced when building DeFi products and services.
- Liquidity and Collateral
DeFi is collateralised by Ethereum as well as Dai and USDC. However, this over reliance on Ethereum means that bringing other collateral types to DeFi, such as Bitcoin, via sidechains is an obvious answer to this bottleneck.
Symbol is built for cross-chain interoperability and, through atomic swaps and multi-level multi-sig features, can provide a ready made solution to assist with collateralising the DeFi system.
- Reducing Volatility
Today, the primary use case for DeFi remains the facilitation of ‘longs’ on Ethereum – just buying the token and waiting for it to rise up in value. DeFi will only have broken through and created real value when more P2P lending goes mainstream (think microfinance, small business lending, seed funding, etc).
Symbol is the most effective enterprise ready blockchain today. Designed for real world use, Symbol is the connector between business and blockchain because it is easy to work with and build from for any business seeking to create innovative DeFi products.
In summary, Symbol is a great option to help maximise the potential of DeFi and to achieve the ambition of helping to make financial systems accessible to all quickly, efficiently and cost effectively.
The combination of interoperability, ease of use, and hybrid private and public chain allows for secure, quicker and cheaper transactions at scale, and puts Symbol at the forefront of the next phase of DeFi development.
If you are interested in finding out more about how Symbol can enhance your DeFi project, please get in touch.
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