Decentralized brokerage protocol looks to merge lending and DEXs into a modern trade ecosystem

The issue focused on banks having control over their customer's funds resulted in the need for a decentralized system. The question of whether the banks are working for us or otherwise has been asked by business people or individuals who want to save their money. The centralized system is operated by gatekeepers and governing bodies. And with the help of middlemen, such as banks, exchanges, and lenders, they make a certain percentage as profit from every transaction. Visit https://ethereum-trader.app/

The truth is, there is no way to bypass the financial middlemen in the different sectors of banking, trading, and lending unless there is a decentralized system. However, there are decentralized finance platforms strongly competing with the centralized system.

Decentralized finance (Defi) uses technology to eliminate middlemen in financial transactions. Its adoption is powered by blockchain. This system removes the control financial institutions and banks have on money, financial services, and products. Individuals now have control over their money and can trade freely.

How Defi works

The three components of Defi are hardware, software, and stable coins. They enable the development of applications as its regulations and infrastructure are still being debated. There are applications called dApps used in handling transactions on the Blockchain.

Defi operates on blockchain technology used by cryptocurrency. Every transaction is recorded, verified by other users, and encrypted. In applying for loans, the application (dApps) is used to input your loan needs. After this is done, the system automatically connects you to peers that meet your requirements.

 

How Defi is used currently

Defi is designed with decentralized apps called "dApps" or other programs known as "protocol". It is being used to carry out varieties of simple and complex financial transactions. Transactions are handled by dApps and protocols in two major cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH). Despite bitcoin's popularity, Ethereum-based code is used to run dApps and protocols programs. This is because there is more flexible to use in different aspects.

Decentralized Exchanges (DEXs)

Most investors trade cryptocurrency using a centralized system such as Gemini or Coinbase. DEXs allow users to have control over their money by facilitating direct buying and selling of cryptocurrencies with each other without an intermediary. It is one of the forms dApps and protocols are being used. Other forms include E-wallet, Non-fungible token(NFT), stable coins, yield farming, and flash loans.

Defi lending and borrowing

Defi has directed finance to a new path by enabling crypto holders to borrow and allowing the importunity to yield profit annually. An interest rate is attached to individuals who borrow. 

One of the top lending and borrowing platforms is "compound finance". It is developed by Ethereum blockchain and it allows its users generate interest by lending out assets or borrowing against collateral. An automatic liquidation of a loan occurs if the collateral isn't up to the threshold.

The industry is in its early stage and requires more applications before it becomes very competitive. As the industry prepares for a future where assets would have digital equivalent, it means trading(margin or leveraged) would become highly decentralized very soon.

An investor can execute large trades with borrowed assets (debt) without knowing the lender in margin trading. This is made possible by blockchain anonymity thereby protecting the lender. Traders can also partake in yield farming opportunities supported by their performance in margin trading. Profits ear course of trading can be shared thereby increasing the rate lenders earn as well.

Other Lending Platforms

1. Aave

It is a Defi protocol or crypto token that allows lenders to deposit crypto assets into a liquidity pool. Borrowers use the liquidity pool to receive flash loans after they put up their collateral.

2. Anchor

It has a token called ANC. Its objective is to be the gold standard for traders on the blockchain looking to earn passive income. 

3. Venus

It is a synthetic stablecoin protocol from Binance smart chain. It allows users to borrow directly against collateral. It also allows users to mint USD pegged stable coins Called VAI.

4. Abracadabra

It is a cross-chain stablecoin lending protocol that allows users to stake in the vault and generate interest-bearing coins. These tokens can be deposited as collateral to mine MIM (Magic Internet Money).

5. Spell

It is a token generated by Abracadabra's governance. It grants its users voting right