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DeFi- An Explanation

DeFi- An Explanation

Cryptocurrencies are evolving as the digital currencies and money market is ever shifting with new hopes to attain blockchain’s decentralized finance in true sense. 

Recently, countries are pushing forward for the Central Bank Digital Currencies CBDC but cryptonauts are experimenting with the next money market with DeFi protocol. Antlia chain team is developing cross chain scalable blockchain for next generation decentralisation to overcome challenges of blockchain. 

DeFi- A cryptocurrency revolution?

Cryptonauts are calling DeFi as the cryptocurrency 2.0. The DeFi ecosystem is rampaging with hundreds of projects launching with more than $14.32 billion in assets till the third week of November 2020 as reported by DeFiPulse. Last year, the statistics were just over 276 million as reported by DeFi Pulse. But what exactly is DeFi?

Coming to the formal definition of DeFi, it is an abbreviation of much circulated phrase “Decentralized finance” that acts as an umbrella for the financial technologies such as digital assets, network of integrated protocols & blockchain smart contracts, and a vast amount of the decentralized functions and decentralized applications (DApps). Something more exciting about DeFi is the fact that it is not merely just some cryptocurrencies people are trying to buy to make quick bucks. Instead, it is shifting the financial paradigm by integrating the traditional finance functions such as lending to serve real businesses with the introduction of yearly interests.

During these uncertain times, the adoption rate of innovative digital banking solutions is increasing rapidly. 

The current economic vulnerabilities exposed by the global pandemic have opened gateways for innovative solutions.These solutions might include:

Decentralised Lending platforms for borrowing and lending cryptocurrencies. Examples include Compound, Curve and Aave

DEX platforms like Kyber and DEX aggregators like 1icnh

Liquidity Pool Provider Applications like Bancor and Uniswap

Decentralized Prediction Market like Augur

Why DeFi?

DeFi has gained this big boom because of the introduction of the existing financial functions like lending, earning interest and liquidity provision. Alex Pack, the managing director has emphasized the importance of DeFi in blockchain by considering it an instrument capable of reconstructing the existing banking system architecture in a permissionless way. Financial applications in blockchain till now highly relied on gaining the cryptocurrencies and then earning profit on it depending on the price fluctuations. Now, with DeFi, a user can keep his fiat money while gaining the cryptocurrency token on which he/she will gain the interest. This removes the risk factor thus allowing more people to join the DeFi market.

DeFi Lending/ Staking DeFI Platforms

DeFi Lending/ Staking platforms one of the first innovative DeFi platforms that have burst into the market. These DeFi lending protocols help the users to earn interest (APY/APR) on the set of stable coins. To understand the process better,let's start with a rather famous DeFi Lending platforms i.e. Compound and MakerDao

Compound: Compound is basically an organization of publically accessible smart contracts on Ethereum that allows the borrowers to borrow loans and lenders to provide loans by sealing their assets into the smart contract for an amount for time. Like in traditional settings, the interest rates earned by the lenders depend on the performance of the cryptocurrency that has been lended. The performance depends on the supply and demand of that particular cryptocurrency. With every block mined for that cryptocurrency, interest rate changes. Once the loan is paid back, the locked assets are released. Compound native token also known as cToken allows the user to gain interest on the money they deposited while it is being traded or transferred  in other linked lending applications.

MakerDao: This blockchain based decentralized finance platform lets borrowers use volatile cryptocurrency as collateral for loans of stablecoins (called dai) pegged to the U.S. dollar. The borrower pays interest on the loans, but if the crypto collateral falls too far, it’s sold to pay off the loan. MakerDao offers an exceptional solution to the volatility of the cryptocurrency by offering them in exchange for the stable coin known as Dai pegged with the U.S dollars. A user can deposit or send ether in the Maker’s smart contract. This creates CDP or  Collateralized Debt Position (CDP). For every ethereum deposited, a certain amount of DAI is released depending on the collateralization rate. If the price of ETH drops, the CDP is closed meaning it will stop you from taking out more DAI to ensure that enough capital is locked against the amount that has been taken out. To get back your ether, pay back the amount and some additional fee

DeFi Aggregator and Yield Farming 

To understand what DeFi aggregator is, it is extremely important to understand the concept of yield farming. The last wave of DeFi focused on developing solutions that could imitate lending in trading banking. Result was a huge number of crypto exchanges, with numbers skyrocketing  as high as 300(only registered) popping everyday as quoted by CoinGecko. The current DeFi ecosystem is working to build applications trying to find best interest yields from different lending platforms. These interests are generated by the Yield Farming, a technique that moves the crypto assets across multiple platforms to generate most returns possible by trailing the liquidity pools to generate high interests.

Yield Farming automates the process of decisions made during on-chain investment  using smart contracts. These smart contracts employ APIs to find the best DeFi rates such as APY/APR and use that information to transfer the coins. Yield Farming platform initiates profit switching for lending providers, moving the customer’s funds between dydx, Aave, and Compound autonomously. 

With the evolution of DeFi, aggregators are being introduced in the market to maximize the benefits from multiple lending platforms by producing the highest yield possible.

Decentralized Exchange

As already mentioned, DeFI is finding its way to multiple applications; one of the most prominent being exchanges. With the boom in DeFi, decentralized exchanges have gained much more traffic in 2020. According to the Dapp Radar, the trading volume on the Dex for the last 30 days had been high upto $753,744,159 with 27,776 unique traders across multiple platforms. Before, the decentralized exchanges were a huge wave with the capability of on-chain settlement via smart contracts. This avoided single point of failure but token swapping for ethereum was still a 2-3 steps process with Token A swapping with ETH and ETH for Token B. Though this happens in the backend, it costs double trading fees. Infact according to Bitcoin.com, one of the top 6 DeFi platforms is a Decentralized Exchange by the name of Curve Finance. 

2. DeFi Lending/ Staking DeFI Platforms

DeFi Lending/ Staking platforms one of the first innovative DeFi platforms that have burst into the market. These DeFi lending protocols help the users to earn interest (APY/APR) on the set of stable coins. To understand the process better,let's start with a rather famous DeFi Lending platforms i.e. Compound and MakerDao

Compound: Compound is basically an organization of publically accessible smart contracts on Ethereum that allows the borrowers to borrow loans and lenders to provide loans by sealing their assets into the smart contract for an amount for time. Like in traditional settings, the interest rates earned by the lenders depend on the performance of the cryptocurrency that has been lended. The performance depends on the supply and demand of that particular cryptocurrency. With every block mined for that cryptocurrency, interest rate changes. Once the loan is paid back, the locked assets are released. Compound native token also known as cToken allows the user to gain interest on the money they deposited while it is being traded or transferred  in other linked lending applications.

MakerDao: This blockchain based decentralized finance platform lets borrowers use volatile cryptocurrency as collateral for loans of stablecoins (called dai) pegged to the U.S. dollar. The borrower pays interest on the loans, but if the crypto collateral falls too far, it’s sold to pay off the loan. MakerDao offers an exceptional solution to the volatility of the cryptocurrency by offering them in exchange for the stable coin known as Dai pegged with the U.S dollars. A user can deposit or send ether in the Maker’s smart contract. This creates CDP or  Collateralized Debt Position (CDP). For every ethereum deposited, a certain amount of DAI is released depending on the collateralization rate. If the price of ETH drops, the CDP is closed meaning it will stop you from taking out more DAI to ensure that enough capital is locked against the amount that has been taken out. To get back your ether, pay back the amount and some additional fee.

DeFi Aggregator and Yield Farming 

To understand what DeFi aggregator is, it is extremely important to understand the concept of yield farming. The last wave of DeFi focused on developing solutions that could imitate lending in trading banking. Result was a huge number of crypto exchanges, with numbers skyrocketing  as high as 300(only registered) popping everyday as quoted by CoinGecko. The current DeFi ecosystem is working to build applications trying to find best interest yields from different lending platforms. These interests are generated by the Yield Farming, a technique that moves the crypto assets across multiple platforms to generate most returns possible by trailing the liquidity pools to generate high interests.

Yield Farming automates the process of decisions made during on-chain investment  using smart contracts. These smart contracts employ APIs to find the best DeFi rates such as APY/APR and use that information to transfer the coins. Yield Farming platform initiates profit switching for lending providers, moving the customer’s funds between dydx, Aave, and Compound autonomously. 

With the evolution of DeFi, aggregators are being introduced in the market to maximize the benefits from multiple lending platforms by producing the highest yield possible.

Decentralized Exchange

As already mentioned, DeFI is finding its way to multiple applications; one of the most prominent being exchanges. With the boom in DeFi, decentralized exchanges have gained much more traffic in 2020. According to the Dapp Radar, the trading volume on the Dex for the last 30 days had been high upto $753,744,159 with 27,776 unique traders across multiple platforms. Before, the decentralized exchanges were a huge wave with the capability of on-chain settlement via smart contracts. This avoided single point of failure but token swapping for ethereum was still a 2-3 steps process with Token A swapping with ETH and ETH for Token B. Though this happens in the backend, it costs double trading fees. Infact according to Bitcoin.com, one of the top 6 DeFi platforms is a Decentralized Exchange by the name of Curve Finance. 

Introduction

Antlia is an Interoperable and scalable blockchain with trusted smart contract based oracles for seamless data and asset sharing. Assume a web of blockchains where thousands of chains co-exist and every chain has its own metadata, data and cryptocurrency. In this case, users of one chain can only exchange and trade assets, data, services or goods from within that single chain. Currently, users of one blockchain cannot directly connect, exchange data or communicate with any other blockchain without having intermediary. Moreover, Legacy digital systems cannot exchange their data with any blockchain.

Blockchains as a standalone entity have failed to generate an effective impact in the real world scenarios. Antlia scalable blockchain aims to be an interoperable blockchain having oracles that solve such bottlenecks for interoperability. Antlia will link blockchain to blockchains and digital systems which will ensure high cross-chain exchanges efficiency and enhance resilience to fault tolerance. The end result has much higher security and improved throughput.

Our Antlia blockchain will be accompanied with interoperable dApps: Wallet, Explorer, Faucet and Antlia IDE for writing smart contracts “with smart contract templates based on web assembly” as the interfaces to interact with the Antlia blockchain. During the first phase of Antlia blockchain’s launch, a centralized exchange will also be instigated which will allow the users to become a part of the Antlia ecosystem. During the later stages, Antlia ecosystem will include decentralized finance DeFi tools that will help create a decentralized eco-system in true sense.

Consensus

Antlia has proposed an approach to consensus called rollover Proof of Stake “rPoS '' and its consensus engine is based on modified tendermint ''PBFT”. Antlia rPoS helps to achieve decentralisation with high throughput and security. rPoS eliminates waste from PoW’s computation of resources and centralisation of DPoS/PoS. Antlia consensus provides balance between liveness and safety. The Antlia consensus protocol provides high security through unbiased randomness generated at every 05 blocks’ proposal.

Modified Tendermint Consensus Engine

To understand why Antlia is using Modified Tendermint, it is extremely important to understand the Tendermint PBFT base consensus engine. Tendermint is a byzantine fault-tolerant consensus algorithm used for securely and consistently replicating an application on multiple machines. Being a BFT consensus algorithm, Tendermint can work even if 1/3rd of the machines fail or act maliciously. Tendermint not only has an authenticated encryption system for peer discovery but it also has a high throughput in terms of less block confirmation time and Transaction Per Second (TPS) rate. Tendermint’s core responsibilities include sharing blocks and transactions between nodes (blockchains) and establishing a fixed order of transactions. Antlia will use tendermint protocol’s functionality of a blockchain consensus engine which ensures that the same transactions are recorded on every machine in the same order. Every machine whether faulty or non-faulty sees the same log of transactions and machine state. Another major reason to use tendermint is its instant block finality. Tendermint’s Proof of Stake (PoS) is much more scalable than traditional Proof of Work (PoW) consensus algorithm. However, Tendermint is accused of centralization by the community. To improve decentralisation, Antlia brings a concept of rollover PoS algorithm.

Rollover PoS

In this section, we describe Antlia’s rPoS consensus engine and its basic concepts

Validator’s Selection Mechanism

Using Antlia’s rPoS, a number of validators will be selected; the validators set will not be fixed but rollover. The rPoS engine will randomly search for the validators on the basis of a number of factors such as health, liveness and safety. After every 50 blocks “roughly every 02 minutes”, new set of a validators will be selected from the pool with a 10% rollover rate i.e. within the five blocks mining time duration, the validator pool undergoes following changes:

The validators will be sorted in the ascending fashion     on the basis of health, liveness and safety. Validators having best health     comes first and vice versa.

The last 10% of the validators will be swapped with the     new ones on the basis of the algorithm.

This sorting and swapping will allow new validators to enter, making the system more decentralized and trustless.

Voting Mechanism

The chosen validators will start voting on the blocks, therein, developing consensus on the list of transactions. The voting for consensus happens in repetitive sequences where a proposing validator proposed a block to validate the transactions. The chosen validators vote to either accept or reject the proposed block. The proposing validator is selected on the basis of their service to the community, number of blocks they have voted on, in proportion to their voting power. Like any byzantine fault tolerant consensus algorithm

1.      ⅔ of the total votes should be in the favor of the proposed block to be accepted

2.      If more than ⅓ of the total votes are malicious, there will be a threat to a system in which case the consensus identifies the malicious nodes and takes an action against them mentioned in detail at a later stage

Attack Prevention

Antlia’s Protocol will discourage the participating validators to act in malicious manner by introducing the concept of “Grounding”. Antlia will actively stop the validators by:

1.      Cutting some/or full stake.

2.      Imposing grounding period on the validators so that they cannot propose a new block or vote for the new block.

Antlia’s Inter-Blockchain Communication (IBC)

Antlia’s Inter Blockchain Communication (IBC) protocol will allow the state machines-independent in nature to communicate. These state machines may be blockchains or distributed ledgers. This protocol will enable the communication among different state machines by acting as a communication bridge between them. The communication bridge will be called “Antlia Powerhouse”, more details will be given in the whitepaper. The goal of IBC is to achieve the real life application of multi-token wallet systems with multi-token transferring. This will be possible by achieving fully functional IBC. This will allow users to rely on a single wallet to transact across different blockchains which will eventually make blockchain to be widely adopted.

·         Antlia will create an interface for blockchains to become interoperable by using IBC (Inter Blockchain Communication).

·         Interoperability will ensure transaction management and concurrency control.

·         Antlia will preserve the autonomy of blockchains such that the individual blockchains satisfy their own needs first.

·         It allows blockchains to exchange data and assets across pre-defined networks while the data may not be manipulatable.

·         Blockchains will not be integrated together, they will only be made interoperable.

Antlia Oracles

Antlia Oracles will be the trusted third party entities that will transfer data to and from Antlia blockchain and other data structures. They will simply function as a data supplier to the Antlia blockchain through smart contracts. Here, the smart contracts evaluate the incoming data from the oracle and then initiate an action in the blockchain based on the received information. The key of using Antlia oracles is that it enables blockchains to communicate outside of its network. It eventually brings data into the blockchain's consensus mechanism. Moreover, in Antlia, blockchain oracles will act in a way to supply data from the exchanges to the smart contracts of Antlia’s core network.

Connection between smart contract and oracle

A smart contract being a self-executing piece of code will evaluate data from Antlia’s oracle and will proceed an execution on the basis of that information. Here, smart contracts are not required to directly access information from the outside network which lightens their workload. Similarly, in Antlia, the data sources will not provide information to smart contracts directly. Through consensus-based oracles, this proceeding will be divided as follows:

 Antlia’s oracle will collect the required-only information from the outside sources.

 The information by oracle, will be passed to its smart contracts for execution.

 After execution, smart contracts will pass the information to Antlia’s core network.

Antlia VM with smart contract developing tools

Antlia's first implementation of virtual machine will run on top of Antlia SDK application. The choice of VM language for Antlia is Web Assembly. This WASM virtual machine will act as an intermediate language that will compile the smart contract’s programming language into a portable VM.

ANA Coin

The ANA Coin is a unit of value that is native to the Antlia Blockchain. ARC based token can be generated using WASM based smart contract at Antlia Blockchain. Any asset can be used for the gas and rewards for staking. Currently, ANA coin will be used for Gas and staking purposes at Antlia Blockchain Network.

Smart Contract Creation

The smart contract creation on Antlia’s VM will enable the “write once, run everywhere” feature so that the program developer will write only one version that can run on different servers. These smart contracts on Antlia’s WASM will lay the basis for Antlia's IBC architecture by running on different chains. The desired outcome of decentralization is therefore concurred by allowing distributed deployment to achieve the deterministic characteristics that every node should possess. Most of the smart contracts follow the script mode to implement the programmatic logic, the most prominent example being BTC. Though this mode has been quite effective for initiating and validating transactions, it faces a major drawback of scalability. Antlia VM with its smart contract developing tools will not only enhance scalability but allow the developers from different programming languages to compile smart contracts on one machine.

Use of Web Assembly

The platform independence that Antlia VM is seeking could be made possible using web assembly. Moreover, Antlia VM will also offer multiple different family languages to smart contract developers such as C/C++, Rust, Typescript and Haxe, therein, allowing the developers to code in the language they are comfortable with and then run on the browser. Besides this, the use of WASM in Antlia VM will have the added advantage of being memory-safe, sandboxed, and platform-independent.

Antlia WASM Smart Contract Functions

Antlia’s WebAssembly contracts will be black boxes having no entry points and access to the outer world. The smart contracts built on the WASM will be unmodifiable by anyone. The allowed functions will include:

Upload contracts

The smart contract tools will allow the Antlia’s ecosystem supporters to upload WASM bytecode providing functionality to connect to Antlia. After uploading the contract code, it should undergo an audit from the Antlia's eco-system supporters and validators to decide whether the functionality implemented in the contract is useful. Once the contract receives a positive vote, the smart contract will be activated.

Instantiate contracts

Once the smart contract is uploaded and voted on, an instance will be created for it to be usable. A unique contract address will be then assigned.

Disable Contracts

In case, if the smart contract is against any of the Antlia governance rules, the smart contract shall be disabled.

Antlia Use Cases

Antlia Exchange & Wallet

Using Antlia centralized exchange, the traders will be able to gain Ana coin after the investment period ends. Antlia centralized cryptocurrency will allow the traders to trade the listed cryptocurrencies with Ana Coin. The trader shall also be able to store the supported cryptocurrency on Antlia Exchange's wallet. These funds will create the liquidity pool for the exchange.

Antlia's Multicoin Wallet will be non-custodial wallet having support for ANA and BNB coin. It will be in variety of versions, mobile, web, browser, extension & nano ledger.

Antlia Multichain Explorer

Antlia Multichain Explorer will monitor the status of different metrics of Antlia network specifically ANA and BNA Coin. With its customized query support, it will allow the user to filter detailed results. It will have both Web and Mobile Interfaces

Antlia’s DeFi Ecosystem

The centralized exchanges have various drawbacks that Antlia Defi Ecosystem will try to improve such as:

·         Centralized deciding authority reduces independence from the system.

·         Higher risk of being hacked

·         Higher trading fees.

·         Involvement of centralized Broker or Brokerage service to Buy or Sell.

·         Longer waiting time for order matching.

·         Low liquidity

Dex

To improve all these problems, the Antlia ecosystem will include:

Antlia DEX will have no central point of failure and will be uncensorable. It will provide full control over private keys and how those funds are used, secured, and transparent trading to the traders. More it will be the solution for:

·         Lower fees

·         Less operation cost

·         Lesser down time

The order matching on DEX will be done via WASM smart contracts while other things related to the process will be done via on-chain settlement. Maker and Trader will submit their order in the smart contract and the trade process will be simple: Deposit, trade, and withdraw.

Liquidity Pool

Antlia Defi ecosystem will build liquidity providing applications that will find the best interest yields from different lending platforms. This application will employ a technique called Yield Farming that will be responsible for moving the crypto assets across multiple platforms to generate most returns possible by trailing the liquidity pools to generate high interests.

Aggregator

Antlia will build an aggregator module where it will assemble the orders from existing decentralized exchanges to calculate the mean values of the price the cryptocurrencies have been selling on the market. These mean values will then be passed onto the DEX and CEX. It improves the liquidity by combatting the lack of orders. When you compare an asset’s price on a single centralized exchange to its price on a single DEX, the DEX’s price is usually worse. This drives traders away – often to centralized exchanges – creating a feedback loop that keeps liquidity low on each DEX and across DEXes. Antlia’s aggregator will connect exchanges together on a single platform to:

·         Increase order matching efficiency

·         Ensure faster transactions

An Interoperable & Scalable Blockchain for cross-chain data sharing. It presents a solution for Blockchain Interoperability, Scalability and Oracles.