Decentralized Finance and the Future of Money
Decentralized Finance is built upon blockchain technology, and is a recent and potentially robust alternative to traditional finance. It has intrinsic advantages compared to traditional or Legacy Finance. However, there are a few factors that are currently impeding its widespread adoption. The obvious one is the recentness of its development, and indeed, the winged-word of the advantages of DeFi still needs some more time to spread to the masses.
Yet, the hard truth is that although DeFi does present certain preferable innovations to Legacy Finance, the latter has its own aspects which render it superior to DeFi in some respects, even in terms of technology. One shrewd team of developers within the world of DeFi recognized the flaws impeding this new form of finance from bridging the gaps on every front, with traditional finance.
Indeed, the visionary innovations put forward by the Lattice Team gives rise to the understanding that not only will sophisticated projects within DeFi inevitably lead to its widespread adoption but, more significantly, projects such as Lattice are the face of the market’s future. With the ostensible grandiosity of such a claim, the skeptical reader will demand evidence, and the critical reader will desire excellent reasons to support such a belief.
I think such appeals to the writer are both valid and justifiable. It will be my aim to elucidate several key factors as to what makes DeFi better than the alternative of traditional finance, as well as where the traditional market of Legacy Finance excels. Finally, I shall expand upon some of the ways the Lattice Team has implemented major advancements in blockchain technologies, in order to create an edifice with stronger and more secure foundations than the ones upon which previous DeFi projects have been built.
Decentralized Finance (DeFi) is a term employed to describe a variety of decentralized financial applications, products, and services within blockchain or cryptocurrency, that largely mirror ones available within traditional finance, with an express purpose of circumventing the need for intermediary agencies. An obvious innate advantage that DeFi has over Legacy Finance is that the currencies being traded, loaned, invested, etc. within its ecosystem are cryptocurrencies. It is not a small caveat for individuals involved in traditional transactions that the currencies they are dealing with are fiat, and are subject to ineluctable devaluation through inflation.
In the case of fiat currencies, neither the most powerful governments nor the most sagacious central planners can stem the tide of time debasing their worth, as they have neither scarcity in number nor a single commodity to bestow upon them a solid value. Of course, the lackluster status of fiat currencies does not automatically confer upon cryptocurrencies an illustrious position.
Indeed, a cryptocurrency will not attain a significant valuation nor a high degree of demand, unless it has distinguishing features that places it in a prominent position among its kindred. Pertinent factors that tend towards more valuable crypto assets includes: the underlying technologies, utility, and scarcity of the tokens, or coins.
It is notable to mention that all these factors considered are united in the Lattice (LTX) token, but more on that later. When contrasting the natures of the global fiat system with that of quality cryptocurrencies, one ascertains that it is no wild surmise to consider the latter the inevitable future of money.
Yet, if cryptocurrency is to either replace the fiat system or to offer a viable and vibrant alternative to traditional financial institutions and agencies, we will need to go further than traditional blockchain. This is exactly the reason for the need and realization of the DeFi ecosystem. Fortunately, even at this nascent stage of Decentralized Finance there are other innate advantages over Legacy Finance outside of the utilization of crypto assets.
Another one of the major advantages of DeFi is its permission-less participation. It is accessible to anyone regardless of their credit scores, it eliminates a need for KYC, etc. When engaged in financial activities like lending or borrowing, this has an upside. The recipient of the loan does not have to meet an arbitrator’s specific requirements and approval to receive the loan, and the lender is secured in issuing the loan, as the loan is entirely based on collateral.
Furthermore, unlike Legacy Finance, it is entirely non-custodial, giving market participants total control over how they invest, and what they do with their assets and money. In this way, one has complete freedom in their financial decisions. Additionally, Defi creates a borderless environment for liquidity, allowing access to the market for everyone with internet access. This, in theory and practice, can lead to greater market participation and eventual freedom in financial choices for a significant percentage of the global population.
However, despite the promising aspects of DeFi, such as what has been covered so far, and the serious potential it has to profoundly alter the face of the future market, it has lagged behind Legacy Finance in certain respects. On one hand, this is to be expected as DeFi is, in many respects, in a state of infancy despite its rapid growth.
This billion dollar market is far from its maturity, especially in comparison to the hoary-headed traditional security market, with its approximately 30 trillion dollar market cap. Our other hand tells us that where there is a flaw or a fault in the budding market of DeFi, it should be redressed, if at all possible, in order to actuate the still unknown, full-potential of the flora and fauna emerging in this new form of finance.
Fortunately, the most pressing problems with Decentralized Finance, that have hindered its viability, lending an upper-hand to traditional finance, have not only been identified, but have been resolved by the ingenuity and creative virtuosity of the team at Lattice Exchange.
There are three major facets that asset investors expect from a financial market: scalability, speed, and security. Although the traditional market has largely provided these, Decentralized Finance has underperformed. Fortunately, Lattice has surmounted the technological hurdles that remain prominent stumbling blocks on other networks.
It should be no surprise that Lattice’s Constellation is the only decentralized network that actively works with the United States Federal Government, and receives the government’s support for its service in providing secure data access, a zero trust network for preventing security breaches, as well as the tokenization of data.
As I have previously mentioned, one of the significant problems the DeFi milieu faces is that blockchain infrastructures so far have been exceedingly limited in scalability. In a nutshell, they have been poorly equipped to handle the growing workload of increased usage on their platforms, which has consequently resulted in significant slowing of transactions.
Furthermore, these platforms do not have the same capacity for data processing available in traditional finance. The majority of DeFi activity is occurring on the Ethereum platform which is subject to this issue. Lattice makes use of the Constellation Network Hypergraph, and a Transfer Protocol that not only solves the problem of speed and scalability intrinsic to other platforms like Ethereum, yet vitally, creates an environment which permits interoperability with existing blockchain networks and remarkably, also with external data sources residing previously with traditional systems alone.
Before the advent of Lattice and the Constellation Network, serious weaknesses in the armor of Decentralized Finance were its inability to aggregate liquidity and its tendency to be subject to slippage. These have repelled many potential participants. Previously, liquidity has been dispersed in DeFi, and there has been a tendency for the expected price of trades to not be reflected in their execution. Lattice Exchange pools liquidity from multiple locations, building higher trading amounts and decreasing slippage. In order to curtail slippage and increase liquidity, Lattice was developed with the capacity to support increasingly complex Automated Market Makers (AMMs).
According to Lattice Exchange’s Official White Paper, AMMs are “algorithmic agents that provide liquidity to electronic markets.” Automated Market Makers are not a new addition to DeFi, however, previous manifestations of this technology on the other platforms have been comparably simple and largely ineffective. Contrarily, the advanced AMMs that Lattice are developing are institutional grade and attain the sophisticated level enjoyed by traditional finance.
I have dilated on some of the superb breakthroughs that the Lattice team has made to render their project the prime innovator in DeFi, but a word should be said about their cryptocurrency governance token, LTX. The token will have a total supply of 100 million, giving the token a fixed scarcity, smaller than the current supply of Ethereum.
A large portion of them will be unlocked only through liquidity mining (45 percent). This will further encourage platform participation. Only 25 percent of the tokens will be distributed through private and public sales. In addition to all of this, there is a partial burning of LTX tokens through the system of transaction fees, this will make the tokens intrinsically deflationary, contributing to a more valuable LTX token over time.
The Lattice team has taken major steps forward in the advancement of DeFi, which have admirably bridged the gaps between the sophisticated and seasoned realm of traditional finance and the burgeoning innovative world of Decentralized Finance. Consequently, by even the most cautious outlook on the future progression of DeFi, when one considers the brilliant innovations of the Lattice team, the solid solutions that the team has conceived and implemented to inevitably extinguish the problems that have plagued Decentralized Finance in its present stage of development, as well as the validation that the project has received from the United States Federal Government; It is clear that Lattice will stand as a linchpin and leader in DeFi, and tremendously assist in the facilitation of the widespread adoption of this evolution in finance.
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Article is the gifted work of John Ryan
John Ryan is an independent writer and an avid enthusiast of blockchain technology. He received his University education at Northern Michigan University, as a history major, where he was inducted into the Phi Beta Kappa Society for academic excellence. While in Michigan, he also trained as an athlete at the United States Olympic Education Center, where he achieved the status of a multiple-time University All-American in Greco-Roman wrestling. He has authored several plays and a collection of poetry. Some of his major areas of interests includes: Finance, Literature, and Religious Studies.
He is available to contact via email at: arete.aphthiton@gmail.com.
