The technology behind the development and maintenance of digital or virtual currencies is arguably inspired by the events and happenings in our world. The creation of Bitcoin (BTC) by the mystery man with the pseudonym Satoshi Nakamoto was driven by the inconsistencies in the monetary system at the time, especially as it relates to mobile money transfers. Satoshi created Bitcoin to be a faster, and more secure alternative to fiat payments while bypassing banks and other central bank-approved middlemen.
The Evolution and Revolution of Decentralized Finance (DeFi)
The creation of Bitcoin has only helped to sire the emergence of more innovative inventions within the digital currency ecosystem. A relatively new sub-niche is Decentralized Finance or DeFi for short. DeFi aims to usher in a more invasive revolution of the financial system as it aims to propound on the payment offerings of banks to offer more customized services such as borrowing and lending.
Through DeFi platforms such as Aave, users from any part of the world can access quick loans at a much lower rate than what the banks offer while also guaranteeing a hassle-free application process. Other notable offerings peculiar to DeFi include Yield farming or Liquidity Farming, a process whereby users lock up their digital currency assets while getting a corresponding return. This is modeled after the savings and deposit structure in a traditional financial setting.
While one may be forced to applaud the ingenuity of the developers of these decentralized finance protocols, it should be worthy of note that the majority of the projects are returning power to the community, and while central banks control the monetary policies in today’s financial world, each DeFi platform user can wade in a significant influence in how the platform is structured and governed. This is a community governance initiative and it is crypto’s way of democratizing its revolution.
How Crypto Governance Works
The DeFi protocols that utilize community governance structure has a digital token (governance token) that is native to the ecosystem just the way Ether is the native token of the Ethereum Network. The native token of each project serves a multi-function ranging from powering transactions within the ecosystem and also as a voting power for each holder.
The developers behind the project usually suggest the nature of changes – usually more than 1 alternative – to be implemented within the protocol and community members’ votes based on their voting powers, as defined by the number of the native tokens they hold.
The concept of community governance became popular in the past year, which has been largely tagged as the year of DeFi and top DeFi protocols that operates with power vested on their community members include MakerDAO, Aave, and Compound and the governance tokens of these protocols include Maker (MKR), AAVE, and COMP respectively.
Crypto to Foster Easy Integration Amidst World Embrace
The entire cryptocurrency ecosystem is bringing in a massive revolution but in the most creative ways. The entire innovation in the space ranging from Bitcoin to DeFi, to Stablecoins and decentralized exchanges are at best adapted from what is currently obtained in the financial world but with cryptocurrencies and decentralization as the focal point.
The fact that the creation in this space is not entirely alien to the world will foster a seamless integration and would be boosted by the rollout of more unique product offerings.