One of the schools I graduated from was an economics school. I chose this direction because I am interested not only in new technologies such as blockchain but also in finance. What if you put them together? Then there will be Decentralized Finance (DeFi).
What exactly are DeFi
DeFi brings traditional financial products to an open and decentralized world, which greatly improves security, reduces overall costs and eliminates the need for intermediaries.
Decentralized finance offers many advantages over traditional financial services. The use of intelligent contracts and distributed systems makes the creation of an application or financial product much simpler and more secure.
For several months we have been able to observe that DeFi is experiencing its very dynamic development. For me personally, it is a fascinating topic because it is a combination of two fields that are my favorite.
I have been experimenting with DeFi since the beginning, when they were not so popular yet. Today, the main priority as a base for Defi projects is ethereum.
Ethereum is not an ideal solution because in its current form 1.0 has its drawbacks. One of them is that with such a large increase in popularity and the number of transactions, the fees for actions are definitely too high.
A year ago, I thought that it is a pity that you can not create Defi projects based on Bitcoin. It turns out it was worth the wait because the new Stacks 2.0 blockchain makes it possible!
What is Stacks 2.0
Maybe at the beginning I will briefly introduce what Stacks 2.0 is. It is a platform that aims to increase the utility of Bitcoin and add value to it and its users. So that each of us can benefit from it. An example of the benefits that Bitcoin will give us may be decentralized finance based on it.
How is DeFi on the Bitcoin network expected to work (#DeFionBTC)?
Stacks 2.0 is like another layer built on the foundation of Bitcoin. This project is based on trust and security provided by Blockchain technology and Bitcoin itself.
Thanks to the Clarity smart contract programming language and Proof of Transfer, developers will be able to create smart contracts in a much safer language that is predictable and settable
What is Proof of Transfer
Proof of Transfer (PoX) is a new consensus mechanism that secures the Stacks 2.0 blockchain
(PoX = spend BTC, receive STX)
As you can see in the PoX formula, the well-known Bitcoin and STX tokens representing the blockchain Stacks are well-known to us.
STX token holders (Stackers) will receive Bitcoins as a reward for stacking them. On the other hand, people who want to secure the network with the deposited Bitcoins have a chance to receive tokens in the VRF 500 STX competition.
In this way, both BTC and STX are transferred from one user to another. It is a two-way action that is similar to a Win-Win strategy in which both sides win.
Proof-of-Transfer solves several important problems, provides developers with new tools, and enables innovation beyond Bitcoin.
What is Clarity?
Clarity is the language of smart contracts developed by Blockstack engineers. Its purpose is to prevent gaps and errors in smart contracts. The most common problems Clarity solves are:
2. Access Control
3. Overflow and Underflow
4. Unchecked Return Values For Low Level Calls
5. Denial of Service
6. Bad Randomness
7. Time manipulation
8. Short address attack
Clarity has post-conditions on tokens, which allows users to proactively defend their assets from theft or destruction by unknown attackers and unknown bugs in other contracts.
Key underlying principle of Clarity is ‘what you see is what you get’. As a decidable language, Clarity enables developers to know, with certainty, from the code itself what the program will do.
Combine PoX and Clarity Smart
When combined with Clarity Smart contracts, PoX eliminates the choice between flexibility and security. With PoX, developers can build functionality on top of a secure foundation in Bitcoin while Clarity’s design helps eliminate whole classes of smart contract bugs and provides greater predictability.
Proof-of-Transfer provides a built-in funding mechanism for new chain, and the ability to be rewarded in a base currency like $BTC.
With Proof-of-Transfer, developers can effectively create a new Proof-of-Work chain that is anchored in the security of Bitcoin, the world’s most secure chain.
As you can see, we live to see the times when we can have decentralized finances based on BTC thanks to Stacks 2.0 and Clarity.
I look forward to seeing more solutions to test them in practice.
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