Guest Contribution by Oluwatojumi Oludayo
The explosiveness of DeFi is no longer making headline news as it has been one of the latest top-notch eye-catching projects that have appeared to provide answers to the market demands. DeFi has grown this much simply because of the dominance and ease it offers users by making financial products readily accessible directly to users and bypassing banks or brokerages. As it does not require any stressful or serious validation before allowing users to use and make P2P transactions.
The year 2020 was quite the rollercoaster of unexpected and unimaginable experiences as the pandemic greatly had a huge impact on every sector and niche in the world. The versatility and flexibility of digitalization and cryptocurrency became more glaring to everyone during this period.
DeFi has shown that it has the potential to be bigger and more successful than the legendary ICO bubble of 2017. As we know smart contracts form the basis on which DeFi is built. Digital smart contracts enable you to exchange valuables transparently and avoid a third-party transaction or a middle man. Smart Contracts help to take out the middleman from the equation so as not to spend needless money. Smart contracts execute trades and transactions automatically once the exchange criteria have been met. Ethereum is the biggest smart platform.
DeFi takes components of traditional finance and decentralizes them by removing middlemen and replacing them with Smart Contracts. DeFi has grown into a complete ecosystem of working applications and protocols that deliver value to millions of users. Assets worth over $30 billion are currently locked in DeFi ecosystems, making it one of the fastest-growing segments within the public blockchain space.
DeFi Yield Protocol
The DeFi yield protocol (DYP) is a unique protocol that allows virtually any user to provide liquidity, earn DYP tokens as yield while maintaining the token price. Unlike some DeFi user interfaces, the DYP interface is quite simplified, accommodating new and expert yield farmers.
DeFi’s turnaround was complete when it ventured into Open finance otherwise known as lending and borrowing. By allowing users and investors to borrow at a specific interest rate ensuring that the lenders get rewarded handsomely by receiving annual yields.
There have been concerns as to “whales” being the determining factor of how DeFi operates. For instance, when the Sushi dump occurred where the anonymous founder dumped all of his Sushi tokens for ethereum. It was a catastrophic scenario, one investors wouldn’t want to experience again.
To avoid the recurrence of this unwanted situation DYP has developed an anti-manipulation feature that prevents the whale advantage by automatically converting all pool rewards from DYP to ETH at 00:00 UTC daily.
The system then disseminates the rewards to liquidity providers. This manipulative feature ensures that the pool’s liquidity is fair to every participant.
The smart contract also maintains the DYP token price by handling fluctuations such that when there is negation beyond the 2.5% value of the DYP price the smart contract maintains token value and stability by only swapping as many DYP tokens to ETH instead of swapping all 276,480 DYP tokens for ETH at 00:00 UTC.
Furthermore, the cumulated excess DYP is then distributed in the next day’s rewards. If there are still leftover DYP tokens being a DAO(Decentralized Autonomous Organization)the future of the leftover DYP tokens is determined whether to distribute them to token holders or burn the tokens from circulation by the DYP governance through voting. The most prominent risk of yield farming is a smart contract bug and to prevent and cancel out the effect of an anticipated risk of a smart contract bug on their network, DYP ensures all their smart contract codes are audited.
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