DeutschDecentralized finance (kurz DeFi) ist ein allgemeiner Begriff und bezeichnet die dezentralisierte Finanzierung, basierend auf der in den letzten Jahren immer stärker anwachsenden Blockchain Technologie. DeFi versucht den Mittelsmann, heute meistens eine Form des Bankwesens, zwischen finanziellen Transaktionen zu eliminieren. Man spricht dabei von einer Peer-to-Peer Finanzierung, welche sich durch hohe Sicherheit und schnelle Transaktionszeiten auszeichnet, da alle Transaktionen direkt zwischen den miteinander handelnden Parteien stattfinden. Bekanntester Vertreter im DeFi Bereich ist mit Abstand die Kryptowährung Bitcoin. Entwickelt wurde Bitcoin im Jahr 2008 von Satoshi Nakamoto. Bei dem Namen handelt es sich allerdings bisher nur um ein Pseudonym. Die wahre Identität des Bitcoin Erfinders ist bis heute nicht bekannt. Seit der Entwicklung von Bitcoin wurden etliche weitere Blockhains entwickelt, die meistens Altcoins genannt werden. Erwähnenswert davon ist vor allem ETH bzw. Ethereum. ETH wurde im Jahr 2015 veröffentlicht und wächst seitdem stetig in Funktionalität und Nutzerzahlen.
Current Problems of Ethereum
ETH, as one of the pioneers in the DeFi space, records the most transactions and repeatedly encounters challenges that encourage both users and developers to think in a problem-oriented way. A current example of a problem with the Ethereum network was the Uniswap Airdrop. Uniswap is a token exchange platform on which Ethereum or ERC20 tokens can be traded or exchanged with each other. Uniswap itself is an ETH protocol and therefore every transaction made there counts towards the Ethereum network. The operators of Uniswap promised every active user who was active on Uniswap until September 1, 2020 an airdrop of 400 Uniswap tokens. These 400 Uniswap tokens corresponded to approximately €2,000 in mid-September. Of course, the rush to the website was immensely high, which led to the Ethereum network being overloaded. Due to the overload, transaction fees temporarily rose to up to USD 50 and there was a literal blockage of the Ethereum network. This overload lasted for some time until the system was able to process the accumulated transactions. In general, transaction fees will always increase the more transactions take place on the ETH network. The more users send tokens or are active on decentralized trading platforms, the higher the fees for the entire network, which raises the question of whether this system can withstand future user numbers or not. Work is already underway on solutions to this problem. A much-discussed proposal for a solution is: “Proof of Stake” on the subject of Decentralized finance.
“Proof of Stake” vs. “Proof of Work”
Transactions on a blockchain must necessarily be verified in some way. After all, the system must somehow be able to determine whether a transaction is correct and “legitimate” or not, since there is no third party on a blockchain that could take over. The ETH network uses the “Proof of Work” concept, in which mathematical problems are solved and thus the authenticity of a transaction can be proven. The problem with this is that with high transaction numbers, a lot of “Proof of Work” takes place. This then leads to very high transaction fees. The previously mentioned “Proof of Stake” does without solving mathematical problems, but uses “Staking”. Staking means withholding a certain amount of your cryptocurrencies in order to make them available to the blockchain for consensus generation. There are also rewards for this, as with Proof of Work. The difference is that Proof of Stake is significantly faster and cheaper and thus eliminates the problem of overloaded networks forever.
The Ethereum network itself is to verify transactions in the future with the help of Proof of Stake. At the same time, other blockchains based on Proof of Stake are appearing everywhere. Most of them use a combination of Proof of Work and Proof of Stake. Algorand and its permissionless Proof of Stake blockchain stands out positively.
Decentralized Finance: Algorand’s Solutions
Algorand (token name is ALGO) is already considered Blockchain 3.0 and if you look at the goals of the blockchain, then with good reason. The blockchain is permissionless and therefore fast and trustworthy. This is made possible by the Proof of Stake protocol, which does not yet exist in the DeFi sector. The Algorand developers speak of “Atomic Transfers”, which even enables the transfer of several investment assets in one transaction. An Algorand is supposed to cost just $0.001/transaction and be recorded on the blockchain in less than 5 seconds. This should remain the case even with high transaction numbers and not increase. This is significantly cheaper and faster than transactions on the Ethereum network. Algorand is characterized above all by the variety of applications. It should find applications in lending, subscriptions and even political elections can be designed quickly and securely. The banking system can be completely replaced. The areas of application are enormous, but it must not be forgotten that this is currently only theory. While ETH already has a functioning system and has been able to handle large transaction numbers, Algorand is so far only a project for the future. Ethereum has so far the largest transaction numbers and is still functional. It is constantly improving and the number of users is constantly increasing. Above all, the update to Ethereum 2.0 promises a high increase in functionality and improvement of the discovered weaknesses of the Ethereum network. The implementation of Ethereum 2.0 is expected to start at the end of 2020 and take several years. It is divided into three phases. By the time it is completed, Algorand should have made significant progress and only then can a reliable comparison of the two supposedly best blockchain systems in the Decentralized finance (DeFi for short) is a general term and refers to decentralized financing based on blockchain technology. area. The Algorand testnet was released in April 2019, shortly after the mainnet was released in June 2019. Up to the current point in time, there have been a number of upgrades that have expanded the functionality of Algorand and improved the user experience with the protocol. A number of bug fixes have also been carried out. The development team around Algorand seems to be constantly striving to improve the technology and ensure an optimal experience for the users.
Future Outlook
Decentralized finance remains a very exciting and rapidly changing sector that requires you to constantly educate yourself and always stay up-to-date. Especially such airdrops, like the one from Uniswap, are an exciting situation for many users, which was missed by many others, which is why it is important to regularly obtain crypto events.
