What is DeFiChain (DFI), and How Does It Enrich the Bitcoin Ecosystem?
The year was 2009. Although he didn’t know it yet, Bitcoin creator Satoshi Nakamoto was about to begin a financial revolution as he mined Bitcoin’s genesis block.
It was the point that marked the introduction of blockchain technology to the world. It is the moment that set the stage for a decentralized alternative to the incumbent fractional reserve banking system.
However, while Bitcoin is the indisputable pioneer of blockchain and cryptocurrency, Satoshi did not design the network to facilitate decentralized finance (DeFi) applications.
Unlike utility-focused blockchains like Ethereum, Bitcoin has a limited scripting language that only allows basic transactions.
Additionally, its low throughput of seven transactions per second and lack of native support for smart contracts meant Bitcoin just couldn’t support DeFi.
This is where DeFiChain comes in. It’s in the name: this DeFi-focused blockchain is built on top of Bitcoin as a software fork, breaking through Bitcoin’s limitations to bring DeFi to its ecosystem.
This article will walk you through how DeFiChain introduces DeFi to Bitcoin, how it works, and how you can get involved.
What is DeFiChain?
DeFiChain is a decentralized blockchain platform that brings specific and optimized functionality for DeFi applications to the Bitcoin ecosystem.
Non-Turing complete by design, DeFiChain is far more secure compared to Turing complete blockchains like Ethereum and Polygon.
This is because non-Turing complete blockchains allow fewer programming possibilities, which results in a smaller attack surface. In essence, DeFiChain trades the diverse functionality of Turing complete blockchains to focus solely on enabling DeFi for Bitcoin in a safe way.
DeFiChain’s native cryptocurrency is DFI, which is used to pay transaction fees, participate in governance, and access various DeFi services on the platform. DFI has a fixed supply of 1.2 billion coins, which are distributed via proof-of-stake (PoS) mining and community fund projects.
DeFiChain also supports other types of assets, such as wrapped and synthetic tokens.
Wrapped tokens are representations of other cryptocurrencies, such as bitcoin (BTC), ether (ETH), or Tether (USDT). These tokens are pegged to their original values and can be transferred between the two blockchains. Wrapped tokens are denoted by the ‘d’ prefix on DeFiChain, such as dBTC, dETH, and dUSDT.
Synthetic tokens (or “decentralized assets”) on DeFiChain are algorithmically generated tokens that track the price of real-world assets, such as stocks, commodities, or fiat currencies. Synthetic tokens can be minted and taken out through crypto-collateralized decentralized loans. DeFiChain’s synthetic tokens are also denoted by the ‘d’ prefix, such as dTSLA, dAAPL, and dAMZN.
What DeFi Applications Does DeFiChain Enable?
DeFiChain enables a broad range of DeFi applications to operate on the Bitcoin network. These include:
Decentralized Exchange (DEX)
The DeFiChain DEX is a peer-to-peer (P2P) trading platform that allows you to swap tokens without intermediaries or custody. The DEX uses an automated market maker (AMM) model, which relies on liquidity pools to provide liquidity and determine prices. You can earn fees by providing liquidity to these pools.
Lending
Lending on DeFiChain allows you to loan out your crypto assets to earn interest. On the flip side, you can also use your tokens as collateral to borrow assets on which you pay interest. Interest rates are determined by market supply and demand.
Vaults
Vaults allow you to lock your tokens in smart contracts and generate synthetic tokens. You can then trade these synthetic tokens on the DeFiChain DEX. Vaults also have a risk management system that monitors their collateral ratio and automatically liquidates undercollateralized positions where necessary.
Stocks
Stocks enable you to trade synthetic tokens that track the price of popular stocks, such as Apple (AAPL), Tesla (TSLA), or Amazon (AMZN). You can benefit from the price movements of these stocks without owning the actual shares or dealing with brokers or regulators.
Options
Options enable you to trade synthetic tokens that represent traditional options contracts, giving you the right to buy or sell an underlying asset at a specified price and time. Options can be used for hedging, speculation, or income generation.
Futures
Futures let you trade synthetic tokens that represent futures contracts. These are agreements to buy or sell an underlying asset at a predetermined price and date in the future. Futures can be used for hedging, speculation, or arbitrage.
Decentralized Identifiers (DIDs)
Decentralized Identifiers (DIDs) provide you with a unique and verifiable identity on the blockchain, which can be used for authentication, authorization, or reputation purposes. DIDs can also be linked to other information or credentials, such as KYC data or social media profiles.
Oracles
Oracles provide reliable and up-to-date data from external sources to the blockchain, such as price feeds and stock performance data. Oracle data can be used for various DeFi applications, such as derivatives, prediction markets, or insurance.
Blockchain Bridge
To facilitate seamless cross-blockchain transfers between DeFiChain and Ethereum, the DeFiChain development team built Quantum Bridge. This blockchain bridge is bidirectional, allowing you to transfer your assets between DeFiChain and Ethereum almost instantaneously with no restrictions.
How to Get Started with DeFiChain
Getting started with DeFiChain is straightforward. Here’s how:
1. Set Up a Compatible Wallet
Create a new wallet or import an existing one that supports DeFiChain. Here are some wallets that support DeFiChain:
2. Buy DFI
Buy DFI from an exchange or swap service, such as Bittrex, KuCoin, or Changelly.
You can also buy DFI on Bake, either as an individual asset or as part of the Bitcoin Builders Smart Bundle with Stacks (STX).
3. Transfer Your DFI to Your Wallet
Transfer your DFI to your wallet address. You can find your address by selecting the “Receive” button in your wallet.
4. Explore DeFiChain’s DeFi Services
Explore the various DeFi services that DeFiChain offers, such as DEX, lending, vaults, stocks, options, futures, DIDs, or oracles.
Why Should You Invest in DeFiChain?
As the largest DeFi-oriented blockchain in the Bitcoin ecosystem, with over $180 million in total value locked (TVL), DeFiChain delivers fast, secure, and transparent DeFi services to users worldwide.
Below are the key reasons why you should consider adding DeFiChain to your investment portfolio:
DeFiChain is Designed to Work With Bitcoin.
DeFiChain is developed for Bitcoin by design, giving you the opportunity to utilize DeFi services without sacrificing the security or sovereignty of your funds.
DeFiChain Delivers High Performance and Scalability.
DeFiChain is optimized for performance and scalability, with a block time of 30 seconds and a throughput of 40 transactions per second. It also has low transaction fees, making it affordable and accessible for everyone.
DeFiChain is Multi-Functional.
DeFiChain offers a diverse range of DeFi services, from trading and lending to derivatives and identity. You can enjoy the benefits of multiple financial products on a single platform without switching between different protocols or interfaces.
DeFiChain is Easy to Use.
Applications within the DeFiChain ecosystem come with a user-friendly and intuitive interface, making it easy for anyone to use. You can access DeFiChain through various wallets and applications, such as Bake, DefiScan, or DefiApp.
DeFiChain is Community-Driven.
DeFiChain is a community-driven project. Its development and direction are determined by its users and stakeholders. Anyone can propose and vote on changes to the platform and participate in its governance and funding.
One such major improvement is MetaChain, an Ethereum Virtual Machine (EVM)-compatible platform that expands the interoperability of DeFiChain. With MetaChain, developers will be able to build next-generation applications that are simultaneously compatible with Bitcoin and Ethereum.
Invest in the DeFi Future of Bitcoin With DeFiChain
DeFiChain rewrote the rules of blockchain by bringing DeFi into the world of Bitcoin. Backed by Bitcoin’s unrivaled security, DeFiChain has made it possible to build DeFi solutions that do not sacrifice security for functionality.
With DeFiChain’s ambition to expand its interoperability to Ethereum and other blockchains, you can expect it to be at the forefront of DeFi innovation well into the future.
Get started by buying your first DFI via Bake’s Bitcoin Builders Smart Bundle. DFI is paired with Stacks (STX) in this bundle, diversifying your investment across two major projects that are responsible for expanding Bitcoin’s functionality beyond a mere store of value.
DISCLAIMER: Please note that the information on this blog and in any articles posted on this blog is for general information only and should not be relied upon as financial advice. Cake Pte. Ltd., Bake, UAB, and its affiliates (the “Cake Group”) are not licensed financial advisers. You may wish to approach your own independent financial advisor before making any decision to buy, sell or hold any product and/or digital assets mentioned in this blog.
Any views, opinions, references, assertions of fact and/or other statements are not necessarily the views held by the Cake Group. The Cake Group disclaims any liability whatsoever that may arise out of or in connection with such statements. Always do your own research before investing in any financial assets and consult a qualified financial advisor if necessary.
