A new financial system without systemic control

Disclaimer: The text below is a publicity article that was not written by Cryptonews.com reporters.

The parabolic growth of decentralized finance in recent years shows that it is here to stay and restructure the entire financial system. Leveraging smart contracts, DeFi transforms centralized financial models into trustless and transparent protocols.

Additionally, it cuts out the middleman, making the protocols efficient and globally accessible. Yet democratizing finance is only one element of DeFi’s macro vision. Its ultimate goal is to create a new financial system where users are in control and can access banking-like features without ever needing a bank account.

DeFi is on the verge of completely eclipsing traditional finance

Over the past few years, the DeFi space has seen unprecedented growth across different blockchains, increase TVL from just under $1 billion to over $200 billion. The massive influx of capital and resources has accelerated DeFi innovation, creating new market sectors capable of challenging traditional finance on multiple fronts.

For example, the role of commercial banks in granting loans, an essential aspect of the financial system, is fulfilled by lending and borrowing protocols with greater efficiency, access and transparency.

Moreover, these protocols offer considerably high returns by integrating different DeFi techniques such as staking, yield farming, and liquidity mining. A typical commercial bank gives a maximum of around 5% interest on savings accounts, whereas DeFi protocols like Anchor can provide 20% with minimal risk.

Another important area where DeFi shines is capital formation. With traditional financial instruments, companies go through a long process to raise capital, sacrificing some to third parties. However, in DeFi, protocols can launch their token on DEXs via a launch pad and quickly tap into deep liquidity. This type of crowdfunding removes barriers to entry and improves the overall visibility of the project.

Speaking of visibility, DeFi can also provide exposure and access to any financial position through synthetic assets. These assets closely resemble traditional derivatives like futures and options, but they are not limited to stocks, currencies and commodities.

As tokenization has no limits, synthetic assets can digitally represent any hard-to-obtain assets or markets. For example, if one wants exposure to crypto mining but does not have the capital to set up mining rigs, one can opt for synthetic assets that track the performance of the bitcoin hash network.

Interoperability could be the missing key

DeFi is ahead of traditional finance in terms of overall functionality and flexibility of financial instruments. But to achieve mass appeal, there needs to be an easier way for users to harness the potential of DeFi. This requires cross-chain and interoperable solutions. Thanks to protocols like Konstellation Network, significant progress has been made.

Konstellation is a native Cosmos protocol connected to two other blockchains, namely Solana and Binance Smart Chain. It encompasses several modern finance markets, such as DeFi, CeFi, NFT gaming, and DAOs.

On the DeFi side, Konstellation aims to streamline investing and asset management for new and experienced investors. To do this, he partnered with a reputable digital investment platform called VegaX, which provides high-performing crypto strategies and indexes with educational content so users can learn more about crypto while making a profit. It also allows $DARC token holders to take out $BTC loans at discounted interest rates.

Constellation also added Taebit, a South Korean DeFi platform, to help investors manage their portfolios efficiently. Users can mint various fiat-pegged stablecoins (aEUR, aUSD, aJPY, aKRW and many more) on Alkemy, a Solana-based stablecoin platform, and use them for trading on Taebit.

NFTs are another area in which Konstellation Network is deeply invested. Its native token, DARC, is of great importance in a gambling game called OG Squid Squad. Players can participate in a Battle Royale tournament and have a chance to win exciting crypto prizes (up to $45,600USDC) and $DARC rewards.

DARC tokens act as fuel for the Konstellation ecosystem at every user touchpoint. And recently, its usefulness has improved even further. Konstellation has partnered with Osmosis to start a fundraiser where LP providers can earn a regular $Osmo reward and additional external incentives of $10 million DARC for both pools $DARC/$ATOM and $DARC/$OSMO. This shows that Konstellation is getting closer to connecting various funds in DeFi and simplifying cross-chain interactions for investors.

The future of finance looks bright

As DeFi continues to grow, there is a need for projects like Konstellation Network to drive adoption and build cross-chain infrastructure. Users and institutions will be able to easily tap into different capital markets with more interoperable solutions.

It also prepares the DeFi space to operate at scale. In the future, everyone will eventually want to be part of decentralized networks and benefit from various crypto asset classes.

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Don F. Davis