The Power of Smart Contracts 智能合约的力量
Regardless of scepticism around cryptocurrency, the use case of blockchain within certain industries and for specific processes has gained general acceptance. One of the most popular implementation of blockchain that has attracted much hype is nonetheless, Decentralized Finance (DeFi).
While DeFi adoption has not reached the heady heights of cryptocurrency mainstays such as Bitcoin and Ethereum, there is a steady increase in the financial sector, experimenting and using Ethereum and Dapps (Decentralised App) that are already available to build one or more financial applications.
From small startups to traditional finance institutions like Barclays and J. P. Morgan, DeFi is providing a ready platform for getting things up and running swiftly. This is because it is really simple to engineer an MVP (minimum viable product) using existing source codes of Decentralised Apps and pre-defined smart contracts for core activities like the act of funds being transferred, and only focusing on marketing.
New Opportunities for Small and Medium Businesses
While most banks are locked into huge and cumbrous legacy systems, which make it difficult to transform, DeFi has removed many of the barriers to entry that prevented SMEs and startups from entering the market. While many institutions regard this as a threat, some large banks have had the foresight to rely on the agility of small businesses and run incubators and accelerators to get their blockchain solutions to market.
The first challenge of venturing into DeFi is to select an appropriate offering that will fill a gap in the target market. There are many use cases, ranging from traditional financial models, such as payments, to new instruments that have evolved because of the capabilities of decentralized ledgers, like tokenization and stablecoins.
Borrowing and Lending
Financial markets have traditionally made their money by the differential between interest they pay to investors and savers and the rates at which they lend this money to borrowers. Stringent credit criteria exclude many borrowers from accessing funds or require guarantees in the form of collateral.
DLT allows borrowers who would not qualify for a loan from a traditional financial institution to access funds from one or more investors directly, with a smart contract defining and monitoring the loan. There are a variety of other models who will lend fiat against cryptocurrency collateral and even pay interest, many of them in the mortgage market. This is a rapidly expanding DeFi domain, fuelled by the Covid-19 pandemic.
Peer-to-peer Transactions and Payments
Distributed ledger technology (DLT) eliminates the need for intermediaries, like banks and other financial institution. The approvals and processes performed by these traditional players are replaced by smart contracts. We have seen how this reduces costs and complexity of transacting. It may also speed up the transaction, although the high velocity of traditional financial platforms cannot be matched currently due to the mechanics of proving the validity of a transaction. Speed and scalability is still an existing issue for most public blockchain, such as Ethereum.
While most people still maintain fiat accounts, there is a move to using crypto for peer-to-peer payments, especially for cross-border payments, where the costs of money transfers and the time it takes disadvantage both the sender and the recipient. Acceptance of the major cryptocurrencies by traditional retailers is also growing.
The ability to transact without an intermediary has the potential to unlock financial services for the unbanked. More recent figures for how many unbanked exist globally are unavailable, but the World Bank estimated the number of people without a bank account to number 1.7 billion people in 2017. Part of the reason for this is that most of these people also lack an identity, which precludes them access to health and educational services, resulting in their inability to open a bank account.
The need for every human being to have a unique identity has been mentioned above. The only viable way of providing everyone with an ID in the minimum of time is via a digital ID, rather than conventional methods of issuing identity cards or physical passports. This is why digital identity is an essential component of DeFi.
Supporting and certifying digital identity initiatives are important, and solutions are being developed using blockchain as a platform, but there is still a need for more innovation in the DeFi sector if the UN Sustainable Development Goals’ Target 16.9 is to be achieved.
The development of open marketplaces that connects buyers and sellers is one of the most popular DeFi use cases, relying on smart contracts to enable direct exchanges without having to go through an intermediary. The scope is very broad, from community-based, localized markets that support small businesses by rewarding customers with tokens for buying local, to markets that give sellers access to global markets without being subject to centralised marketplace like Amazon and eBay. There are also special interest markets for collectors and investors, notably in the art world.
The potential for disruption is not limited to products; services that are themselves relatively new business models, for instance, microtasks/gig platforms Upwork and Fiverr, are seeing blockchain competitors arising. Blockchain platforms do not charge sellers a percentage of their fee and can also support the unbanked in developing countries, as they pay in tokens.
The Energy and Data Marketplace
Although energy and data can be regarded as merely alternate forms of currency, the development of the smart grid and the growing need for data to power communications via mobile and other devices has made this a critical market for consumers, especially in the developing world.
There is also an opportunity for peer-to-peer energy trading and for consumers to sell surplus capacity back to the grid. Providers in this space are generally focused on renewable energy, in deference to the planet’s need for a carbon-neutral future.
Originally, blockchain was all about cryptocurrency, but as the technology matures, the value of blockchain as a platform has been recognized. There are benefits to tokens beyond their use as a form of currency:
- They are fractional. With the current value of Bitcoin in the region of $36,000, a whole coin is beyond the reach of most would-be investors. However, anyone can invest in divisible amount of Bitcoin.
- The design of the token and the purpose it fulfils can be tailored to fit the needs of its market.
- An ICO/IEO/IDO is an alternative way to raise funds for a startup, rather than approaching traditional lenders and markets.
There are still risks attached to cryptocurrencies, notably the volatility of the market. This has given rise to variations of tokens, such as stablecoins, which are linked to major currencies, such as dollars or euros, providing stability against market fluctuations.
Understanding the Risks of Smart Contracts
While the future of blockchain looks very promising and it is expected that many current business models will migrate to the blockchain in the future, it is still a young market. At first glance, DeFi looks like a great opportunity to quickly roll out a new financial product, but a deep understanding of the potential hazards of smart contracts is critical.
These can include:
- Incorrect structuring of the smart contract via inaccurate coding and/or requirements
- Insufficient cybersecurity protection to prevent hacking
- Changes in legislation. Many governments are still working out the legislation to manage the crypto market, and changes can be applied that affect the contract structure.
- Inefficient use of contracts creating unnecessary costs. While Ethereum is not the only platform to offer DeFi, it does have 80% of the market. Smart contracts use “gas” which is due each time a contract executes. This can result in unintended costs which make the DeFi application uneconomical and as a result unattractive to potential customers.
Most organizations that have already implemented blockchain solutions now recognize the value of smart contract audit in mitigating these potential risks. External smart contract auditors helps optimize smart contracts and identify threats and anomalies in the smart contract code.
Before you buy or invest in Plutus tokens, please take the time to understand the rewards model, as well as the risks involved. All decisions that you make on the Plutus platform will be your sole responsibility.
About Plutus Capital
Plutus Capital is backed by a FinTech system built on a public blockchain, where an individual can enforce greater control of his own funds. The Plutus blockchain and token rely on the tamper-proof nature of ledger as well as smart contract and validation to ensure all processes are safe and secure.
Governed by yPLT token holders, PlutusSwap is built by the Plutus Capital dev community. Other than earning rewards on PlutusSwap, yPLT token holders have the right to vote on proposals and decide on future development within our ecosystem. PlutusSwap believes that the key to unlocking economic equality, prosperity and financial freedom lies in developing strong Fintech use-cases on cutting-edge DLT. Most importantly, PlutusSwap is neither a chef nor food. PlutusSwap aspires to bank the unbanked, bringing fundamental financial rights to billions of individuals across the globe. We want to unbank the banked, stripping away the financial prison that many in the first world are enslaved to.
We, are the followers of the great god of wealth, Plutus.
从小型初创公司到巴克莱和J. P. Morgan等传统金融机构，DeFi为迅速启动和运行提供了现成的平台。这是因为使用去中心化应用程序的现有源代码和预定义的智能合约来设计诸如核心资金活动之类的核心活动的MVP（最低可行产品）确实非常简单。
- ICO / IEO / IDO是为初创公司筹集资金的另一种方式，而不是接触传统的市场。