Opinions
Crypto Talk with Terence
Ethereum
CRYPTO:ETH
RISKY
Oct 28, 2021
Stock price when the opinion was issued
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DECENTRALIZED FINANCE
The advent of the Ethereum blockchain, through its major innovation, the smart contracts, has opened the door to a whole new field unknown until then: Decentralized Finance (DeFi).
Decentralized finance is the set of smart contracts deployed on different blockchains, allowing to reproduce (and improve) some financial applications known until now.
One of the most famous examples we can cite is the DeX or Decentralized Exchange. For example, if you want to buy a crypto-currency x, say Ethereum on Binance, the platform acts as an intermediary, managing your buy and sell orders.
With a DeX, transactions are peer-to-peer, without any intermediary, all you need is a wallet (and some tokens to exchange of course). The concept is the same for all DeFi applications. You don't leave anything to an intermediary organization.
If the advantages are obvious (total management of one's wallet, accessibility to a much larger part of the population, etc...), one must nevertheless keep in mind that DeFi is a new field, and that unfortunately, many scams are swarming on blockchains. It is therefore necessary to be well trained and to use only known and verified applications (such as Uniswap on Ethereum, PancakeSwap on the BSC, or 1inch which is cross-chain).
DeX is only a small part of the possibilities offered by DeFi, it is a whole new revolutionary system that is available to us and has already proven itself. Currently, there is about $100 billion invested in DeFi applications.
WHAT IS A SMART CONTRACT?
During our previous articles, we often evoked the terms "smart contracts" or "Dapps", but what is a smart contract, concretely?
The smart contract appeared at the same time as the Ethereum blockchain, the 2 entities are in fact intimately linked.
Unlike the first generation blockchains, such as Bitcoin, the Ethereum blockchain, through its creator Vitalik Buterin, was the first to contain a virtual machine, the Ethereum Virtual Machine, thus becoming a true open source global computer. Its particularity is that it is capable of executing any program, no matter how complex.
A smart contract is simply a program written in a programming language that the blockchain can understand, which will be compiled and executed by the virtual machine of the blockchain.
The creation of Ethereum has allowed a paradigm shift never seen in the history of mankind, in which money becomes programmable and executable according to strict rules written in a computer code.
Many projects such as the Binance Smart Chain, Avalanche or Fantom, have been greatly inspired by this concept, and have chosen to integrate EVM-compatible virtual machines (it is therefore possible to use the same programming language and to easily migrate one's smart contracts from one blockchain to another).
Projects based on smart contracts are coming out every day, and it is extremely likely that in the coming years some of these applications will make blockchain even more history.