On April 22, MakerDAO, known as the DeFi world’s ‘central bank’, in partnership with the financial supply chain project Centrifuge, completed the first real-world asset loan in DeFi (decentralized finance). Centrifuge helped New Silver, a loan pool to set up a real estate repayment and transfer loan pool in its Centrifuge Tinlake protocol. They have just financed their first loan using MakerDAO as a credit facility.
It is a major breakthrough and milestone for DeFi. With the help of DeFi, real-world financial institutions can operate 24 hours a day on smart contracts without trust issues, and provide low-interest rates on loans and access instant liquidity with minimum capital costs. This opens the door to a new trillion-dollar market for DeFi.
DeFi is widely considered as the second large-scale application of blockchain, which has attracted the attention of mainstream financial institutions. Bank of America previously released a report suggesting that it is more optimistic about Ethereum than Bitcoin because of the existence of DeFi.
However, the DeFi in its current form is not ready yet for traditional finance. Take Ethereum, the most widely adopted project of the DeFi ecosystem, as an example. Disadvantages such as high transaction fees, performance inefficiencies and the lack of privacy protection still abound.
Privacy Protection Becomes a Hindrance in the Development of DeFi
Privacy protection is a major bottleneck but also offers up a good opportunity for DeFi. Traditional investors, institutions and banks attach great importance to privacy protection. It is hard to imagine that they will put their assets on a completely open platform.
Privacy protection can make DeFi lending more widely applied and make credit lending on the chain come about faster. The current DeFi lending is usually over-collateralized, because there is not enough information about the users. If privacy can be protected, then users can provide sensitive data, such as financial data and other behavioral data, to generate their own credit evaluation without openly disclosing it. The credit calculated can then be used to provide credit loans to users.
Privacy protection can also protect investors better from attackers. At present, all the information on the DeFi protocol is public. Everyone can see what the user wants to do, so can the attacker. Many attackers will use this information to attack users for profit. If the users’ transaction information is protected, they will not be attacked or arbitraged.
Current Status Quo of Blockchain Privacy Protection
As a financial application, it is urgent for DeFi to strengthen its privacy protection. Only in this way can DeFi become more secure and reach a broader market in the real world.
There are already privacy-focused solutions on the blockchain, such as cryptocurrency Zcash, centralized ‘» Read more
” href=”https://www.newsbtc.com/dictionary/coin/” data-wpel-link=”internal”>coin mixing’ service providers like MixerTombler and Bestmixer.io, and the decentralized ‘» Read more
” href=”https://www.newsbtc.com/dictionary/coin/” data-wpel-link=”internal”>coin mixing’ protocol Tornado Cash, amongst others.
However, centralized » Read more
” href=”https://www.newsbtc.com/dictionary/coin/” data-wpel-link=”internal”>coin mixing services are plagued with security problems. » Read more