18  Blockchain

Derivatives

DeFi enables Ethereum-based smart contracts to enable the creation of

tokenised derivatives whose value is derived from the underlying assets, in

which the counterparty agreements are hardwired in the code. DeFi deriva-

tives are able to represent real-world assets such as fiat currencies, bonds,

commodities and also cryptocurrencies.

DEXs

DEX stands for decentralised exchange. DEXs are cryptocurrency

exchanges that operate without a central authority. It allows users to trans-

act peer-to-peer and maintain control of their funds. DeXs reduce risks of

price manipulation by a central authority as well as theft and hacking activ-

ities because crypto assets are never in the custody of the exchange itself.

DEXs also provide an advantage in that token projects can have access to

liquidity without any listing fees through decentralisation. The traditional

crypto exchanges used to charge millions of dollars to get tokens listed on

a centralised exchange.

Some of the popular DEXs in the DeFi space include AirSwap, Liquality,

Mesa, Oasis and Uniswap.

Gaming

Ethereum-based games have evolved under DeFi because of their built-in

economies and innovative incentives. For instance, PoolTogether is a no-

loss audited savings lottery that enables users to purchase digital tickets.

You have to deposit the DAI stablecoin in order to participate. These get

pooled together and lent to the compound money market to earn interest.

Insurance

Several insurance use cases are trying the use of DeFi to offer traditional

insurance alternatives to help users buy coverage and protect their holdings.

Nexus Mutual provides a smart contract-based cover that protects against

unintended uses of a smart contract code.

Lending and borrowing

DeFi offers opportunities to users to earn interest on their crypto assets. For

instance, Compound is an algorithmic, autonomous interest rate protocol

that integrates with several DeFi platforms including PoolTogether, Argent

and Dharma. The compound smart contract automatically matches bor-

rowers and lenders and also calculates interest rates based on the demand

and supply of crypto assets.