What Is Decentralized Finance? A Detailed Guide Part 3 | How to Implement?
As more technology is being added to finance the expectations of customers are also expected to increase. To catch up, it is imperative for businesses to decentralize finance. It makes life easier for all parties involved. Customers can make transactions with other Peers on a Blockchain. The DeFi industry is estimated to be up to $93 million in 2021. It is expected to gain more value in the next decade.
The costs are cheaper as all middlemen are removed. Also, it is safer to take loans. With so many advantages of DeFi, it is no surprise that many people are turning to this Blockchain technology. Traditional banking systems are slowly being replaced by DeFi as it is more convenient. So how can you implement decentralized finance in your company? Here is how to achieve decentralization of all banking transactions in your company.
Contents:
Decentralized Applications
- How to Create a DApp for DeFi
- Determine the Blockchain to use
- Look at Tokenomics
- Determine the level of decentralization
- Add electronic wallets
- Integrate smart contracts with oracles
- Final Thoughts
Decentralized Applications
DeFi works with protocols and decentralized apps( DApps). As more people find uses for DApps their value keeps increasing. As much as there is profit, cryptocurrency also comes with a lot of security breaches. DApps should have certain features to achieve their desired functions. There are different types of decentralized apps. These include apps for:
- Exchange of cryptocurrencies
- Selling NFTs
- Banking protocols to generate funds
- DeFi transactions
- Crowdfunding platforms
- Lending and borrowing platforms.
How to Create a DApp for DeFi
To implement decentralized finance in your company you need to Create DApps designed for DeFi banking. A good application will provide all the functionalities while giving you room to make improvements. It should remain viable in the future.
1. Determine the Blockchain to use
There are a lot of options when it comes to choosing the Blockchain to use when creating a DeFi app. However, Ethereum remains the favorite one among developers. While it has a lot of advantages, there is a downside. The fact that many people are using Ethereum creates network congestion. This means slower speeds as well as higher operational costs.
DeFi app Developers are looking for cheaper alternatives that may be profitable for newcomers. Apart from the cost, other factors to consider before picking a Blockchain include:
- Support for smart contracts
- Number of users it supports
- Speed of transactions on a network
- Functionalities offered
- The versatility of its ecosystem
2. Look at Tokenomics
Decentralized apps need a crypto token. This is what allows the app to work with DeFi. Tokens have different mechanisms for how they perform their functions. Some are designed solely for exchanges and others for staking transactions.
When creating tokens determine whether they will be used as a reward to users. Decide if users will have voting rights over tokens. Whatever you decide will be applied to smart contracts.
3. Determine the level of decentralization
Decentralized apps, unlike centralized ones, are difficult to update. The user aspect can be easily updated as it is stored on the cloud. However, the smart contracts aspect is harder to update. Once a smart contract has been launched it becomes nearly impossible to update it. For any changes to be made, you have to create an entirely new smart contract.
Technologies are being developed to make it more feasible to make updates. Instead of creating an entirely new smart contract, you can use a proxy. However proxy contracts are easy to hack.
3. Add electronic wallets
Defi apps work with cryptocurrency. So it is only fair that you link them with electronic wallets that would make payments easier. Users get to decide which e-wallets to connect to. Most companies prefer giving users the option to choose a wallet as it creates more trust. Providing your wallet is effective if it comes with additional functionalities. For example, if it can support various tokens from different blockchains it will be more useful for customers.
4. Integrate smart contracts with oracles
For a DeFi app to provide more functionalities, it has to be able to access off-chain data. Smart Contracts need data on the weather or changes in the market. This data is usually generated by oracles that work with independent nodes. Using off-chain data is preferred as on-chain oracles can easily be hacked hence compromising the entire DeFi app.
Final Thoughts
To implement DeFi, you need a decentralized app. A DeFi app should be functional on a specific Blockchain. It would be better if it can work on multiple blockchains. It should be directed towards a specific goal such as tokenization or work with flash loans.
Good apps also give users various interfaces to access functionalities such as mobile and desktop versions. Apps that can connect with data that is not on a Blockchain are preferable. Automation of payments and connection to e-wallets is an added advantage that gives a DeFi app more value. Closely consider the UI and UX design when creating apps. You can either create an app from scratch or outsource a team. Outsourcing will cost you less.
You can get your Real-Time and Historical Cryptocurrency Data with Finage free Crypto Data API key.
Build with us today!
