DeFiChain (DFI) is a project designed to offer a native decentralized finance (DeFi) experience for the Bitcoin network. Using DefiChain, users can benefit from all the features and components that DeFi has to offer.
Today, the Bitcoin (BTC) blockchain is incompatible with complex smart contractssmart contracts and decentralized applications (dAppsdApps) since it is incomplete. Nonetheless, all that might change in the long term with the development of new protocols like Rootstock (RSK). Such protocols strive to bring smart contract functionality to Bitcoin.
In the meantime, however, many projects are building decentralized finance (DeFi) platforms on top of Bitcoin that provide an assortment of features and services. One of them is DeFiChain (DFI), which is a native decentralized finance platform for the Bitcoin network.
As is already mentioned, DeFiChain is a decentralized finance project that strives to offer native support for decentralized finance applications within the Bitcoin network. It lets users access many financial services in a secure and trustless way.
DeFiChain is a hard fork of the Bitcoin blockchain that provides various services and features including:
- Trading – DeFiChain operates a decentralized exchange (DEX) that lets you trade different assets, including stablecoins, crypto, and decentralized assets.
- Asset management – DeFiChain gives you a safe and secure means of managing your assets. You can readily and securely remove, add, and transfer assets using the DeFiChain platform.
Apart from offering DeFi services, DeFiChain also provides several other features that will make it quite an attractive proposition for Bitcoin users. They include:
- Liquidity mining
- Enabling the developers to build their decentralized applications on a blockchain dedicated to decentralized finance.
- Decentralized assets.
DeFiChain views the crypto sector based on a simple premise: People always need to be in control of their finance. Nonetheless, the current networks are still quite far from offering financial services that are fully under the control of the people who use them.
DeFiChain aims to provide people, devices, and machines smooth access to Decentralized financial services, by bringing full decentralized finance capabilities to the Bitcoin network. In 2019, the developers identified the main challenges to pushing DeFi mainstream.
- There is a major issue with scaling on most of these platforms – massive use of a specific dApp impacts the gas prices for all the transactions on the platform.
- DeFi is concentrated on a few platforms – thus the space seems to be missing out on a huge chunk of the crypto market.
- Many general-purpose platforms like Ethereum need huge amounts of coding to offer financial services, growing the risk of hackabilityhackability or bugs within the code.
- The governance models of a majority of the current blockchains are immature and show some signs of centralization, politicization, and uncertainty.
With the atomic swap interoperability on Bitcoin and many other major crypto projects, DeFiChain strives to enable crypto users to smoothly transact over a wide range of financial instruments in an entirely unlimited, decentralized, quick, and secure manner with low transaction fees.
The original function set of DeFiChain includes pricing oracles, exchanges, decentralized lending, wrapping tokens, non-collateralized debt, futures trading (equities and commodities), and asset tokenization distribution of dividends, transferable debts and receivables.
The DeFiChain platform strives to resolve these issues:
- Lack of scalability – the Bitcoin blockchain is not scalable and can just handle a limited number of transactions per second. In the meantime, DeFiChain is powered by the Bitcoin blockchain but is designed to be scalable, with enough ability to handle up to 2,400 transactions per second.
- Inefficient crypto exchanges – centralized exchanges are mostly slow and charge high fees. DeFiChain’s DEXDEX is fast and efficient, with considerably low transaction fees.
The DeFiChain Foundation was launched in 2018 by Julian Hosp and U-Zyn Chua. Dr. Julian Hosp is the Co-founder of Cake DeFi, a leading decentralized finance platform that offers you easy access to lucrative decentralized finance services. On the other hand, U-Zyn Chua is the CTO of the foundation and a core developer of Bitcoin Core. They developed the whitepaper for DeFiChain, but later on, let the community govern the project.
The DeFiChain roadmap is divided into four phases:
- Phase 1 (2018-2019) – launch and initial development. In 2018, the DeFiChain project was unleashed. Then, in 2019, the DeFiChain mainnet was launched.
- Phase 2 (2020) – the launch of a decentralized exchange happened.
- Phase 3 (2021) – In 2021, decentralized assets were launched.
The DeFiChain team has some ambitious plans for the platform’s future, like integrating with popular wallets and exchanges and developing new features and applications. The team is also striving to expand the platform’s reach to many other countries and jurisdictions.
In the short term, DeFiChain aims to bring on-chain governance and unveil the DeFi Meta Chain, an EVM-compatible blockchain in conjunction with the Native DeFiChain. In the long term, the team wants to turn DeFiChain into the go-to platform for decentralized finance.
DeFiChain has already got a strong start, with the growing community of users and developers taking over the platform. It has seen considerable growth since its mainnet launch in June 2020, and the team is highly confident that it will continue growing at an accelerated pace in the months and years ahead.
How Does DeFiChain Work?
DeFiChain is a decentralized finance platform with its mainnet and tokens. Instead of relying on miners, DeFiChain utilizes a Proof-of-Stake (PoS) consensus mechanism.
With DeFiChain, users can develop decentralized applications without having to worry about the scalability issues affecting Ethereum (ETH) blockchain. DeFiChain can process up to 1,070 transactions every second.
Notably, DeFiChain is a Layer-1 blockchain solution that uses Bitcoin’s security model. It functions by anchoring data to the Bitcoin blockchain using Merkle trees. This enables DeFiChain to scale without having to sacrifice security or decentralization.
It works since when users want to add data to the DeFiChain, they have to ‘commit’ this data to the Bitcoin blockchain. They develop a special transaction known as a “Merkle proofMerkle proof.” The transaction consists of the data that the user wants to add and cryptographic proof that the data is valid.
After the Merkle proof is confirmed on the Bitcoin blockchain, that data is said to be “anchored.” From there, this data can be added to the DeFiChain and then replicated across every other node in the network.
The advantage of this strategy is that it enables DeFiChain to scale without needing to compromise security. Since all that data is anchored to the Bitcoin blockchain, no bad actor can tamper with the stored data or add invalid data to the chain.
Main Features Of DeFiChain
Many critical features help distinguish DeFiChain from the other protocols, making it a powerful platform for decentralized finance.
First, DeFiChain provides the ability to tokenize any asset, including real-world and digital assets. The features support the creation of different tokens representing various kinds of assets on the DeFiChain network.
Secondly, DeFiChain provides decentralized oracle pricing that enables the accurate and updated pricing of assets on the DeFiChain platform. This guarantees that users always have access to the most accurate price information when trading various assets on the DeFiChain protocol.
These are some of the features making DeFiChain a powerful platform for decentralized finance. With all these key features, DeFiChain can provide different financial services that anybody around the world can use.
There are many use cases for DeFiChain. The platform can be used to build decentralized versions of popular asset management services like lending and borrowing platforms, synthetic assets, and stablecoins. Moreover, it can be used to create decentralized payment processing platforms and digital wallets.
DeFiChain’s exhaustive suite of decentralized applications enables anybody to securely manage their digital assets without any reliance on a third party. The platform offers a safe and easy way for users to develop, store, and trade digital assets while earning DFI rewards for their participation in network security.
With DeFiChain, there is no requirement for a centralized exchange or custodian. Instead, the users can readily interact directly with each other using the built-in atomic swap functionality. DeFiChain also provides liquidity mining with many crypto- and token pairs, which enables users to earn interest on their digital assets.
The DFI tokenDFI token is the native token of the DeFiChain network. It is mainly used to pay transaction fees and rewards on the DeFiChain platform. DFI token is also efficiently used as collateral in vaults.
DFI is needed to take part in DeFiChain’s proof-of-stake consensus mechanism. A percentage of every transaction fee is automatically redistributed to the validators per their stake. Validators are those users who stake their DFI tokens to secure the entire network.
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The validators also get rewards for successfully validating blocks paid out from a pool of funds funded by a percentage of every block reward (the new DFI tokens developed with every block). In that context, the remaining block reward is paid to the DeFiChain community fund, which can be utilized in funding the development and maintenance of the network.
DeFiChain is a platform that can increase the utility of Bitcoinutility of Bitcoin. Interacting with decentralized applications is expected to make Bitcoin more attractive to users and enable it to become more widely adopted. DeFiChain supports the creation of new financial products and services built on the Bitcoin blockchain.