Education

What Is DeFiChain (DFI)?

The decentralized finance ecosystem has grown by leaps and bounds in the past year. One of the projects people keep close tabs on is DeFiChain, as it unlocks numerous possibilities. Moreover, the DFI price has risen strongly in recent weeks and shows no sign of slowing down. 

What Is DeFiChain Exactly?

The DeFiChain ecosystem is a decentralized blockchain platform for transparent financial services and products. Interestingly it aims to bring DeF to the Bitcoin ecosystem; an objective few projects want to explore today. On the other hand, Bitcoin still has the most liquidity and best security of all networks, making it of great interest for decentralized finance purposes. 

Through its hybrid PoS/PoW consensus mechanism, DeFiChain is relatively accessible for anyone looking to contribute. It also benefits from Bitcoin’s security through a chain anchor via Merkle root. Additionally, DeFiChain, used for all DeFi transactions and data, benefits from low gas rates and supports smart contracts, enabling a sandbox for developers to explore.

The ecosystem supports various “wrapped” tokens, including tokenized versions of BTC, ETH, USDT, DOGE, LTC, etc. These tokens can be accessed and traded through the native decentralized exchanges, offering liquidity mining incentives for all supported currencies. In addition, many people explore decentralized finance for yield farming purposes, and DeFiChain’s DEX has some appealing rates. 

It is also worth noting the DeFiChain infrastructure has been integrated into the CakeDeFi platform. As a result, CakeDeFi makes investing in crypto and earning passive income through decentralized finance very straightforward and accessible. With native support for DeFiChain and its dTokens, CakeDeFi allows for broader adoption of this ecosystem and its products and services. 

dTokens (Decentralized Assets)

While DeFi primarily revolves around cryptocurrencies, the DeFiChain team is keen to explore other options. Therefore, its use of decentralized assets is rather intriguing. Anyone in the DeFiChain ecosystem can create these new forms of crypto investment by locking at least 50% DFI tokens into a vault. Then, the issuer can mint a dToken and take it out through a decentralized loan collateralized by cryptocurrency. 

Contrary to what one may think, a dToken is not pegged to the price or the asset it represents. Every dToken has free price movement that has no ties to the oracle price. Oracles are used to set the price when minting a dToken, but will primarily lose or gain value through supply and demand. Users can hold dTokens as investments, trade them on the DEX, or engage in liquidity mining. 

Repaying the dToken as part of a loan ensures users can regain collateralized crypto assets. Moreover, one can acquire a dToken from the DEX without taking out a loan, which appeals to investors seeking portfolio diversification. 

It is crucial to note dTokens are not issued by companies and are therefore not securities. These tokens only exist on the DeFiChain blockchain and do not classify as decentralized stocks tracking the underlying price of an asset. Instead, dTokens are based on the ecosystem’s decentralized lending system to mint representations of products based n oracle pricing. There are no dividend payments, and minting and trading prices can differ greatly. 

What Is DFI?

The DFI token is the utility token of the DeFiChain ecosystem. Its primary purpose is paying for gas fees – which apply to joining liquidity pools, performing DEX swaps, etc.). Additionally, the token provides governance and voting rights on improvement proposals. Additionally, users need DFI to create decentralized assets and submit community proposals. 

An interesting benefit of holding DFI is how it can be used as collateral to borrow other crypto assets in the DeFiChain ecosystem. That makes DFI rather versatile, although it provides other use cases too. For example, users can set up a staking node, create DeFi Custom Tokens, engage in Community Fund Proposals, and cast a Vote of Confidence. It is good to see a multi-purpose token. All transaction-related fees are burned automatically, keeping the circulating supply in check.

Strong DFI Price And TVL Momentum

DFI is on many people’s radar thanks to solid recent price performance. The current notes a 26.1% increase over the past 30 days and a 42.4% gain in the past year. Moreover, the current DFI price is not too far off from its all-time high, which was recorded a few months ago. If this uptrend continues, there may be a new all-time high for DFI sooner rather than later. 

Moreover, the ongoing growth of DeFiChain in decentralized finance results in the network surpassing $1.4 billion in TVL. Most of the liquidity is found on the native DEX, which notes a monthly TVL increase of over 26.7%. The same growth applies to DeFiChain loans, representing over $250 million in Total Value Locked. 


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JP Buntinx

JP Buntinx has been writing about cryptocurrency since 2012. His interest in crypto, blockchain, fintech, and finance allows him to cover a broad range of different topics.

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