Decentralized finance: Explore the crypto, the chain chain, layer 1 and Bitcoin SV
While the cryptocurrency world continues to grow and evolve, several key concepts have emerged which are essential to understand the technology behind these platforms. In this article, we will immerse ourselves in the bases of decentralized finance (DEFI), by focusing on two popular cryptocurrencies: ChainLink (link) and Bitcoin SV (BSV). We will also explore the consensual mechanism of layer 1 used by certain DEFI protocols.
Decentralized finance (DEFI)
DEFI refers to a network that allows financial transactions without the need for intermediaries, such as banks. This concept is built on blockchain technology and uses smart contracts to automate various financial processes. In the context of cryptocurrency, DEFI gave birth to a new breed of financial instruments, allowing users to lend, borrow or easily exchange cryptocurrencies.
ChainLink (link)
ChainLink is a decentralized oracle network that provides real data to intelligent contracts. The platform uses a network of peer-to-peer nodes to recover and publish information from various sources, such as external services such as news APIs, meteorological APIs and market data flows. Chainlink data can be used to determine the value of assets, allowing more specific predictions and professions.
The main cases of use of Chainlink include:
- Predictive analysis : Oracle Network of Chainlink provides real -time price data from various sources, which can be used by decentralized exchanges (DEX) and other financial platforms to make informed decisions.
- Lending and borrowing : ChainLink allows loan and loan protocols to access a wider range of users and assets, reducing the need for traditional intermediaries.
Consensus mechanism of layer 1
The consensual mechanism of layer 1 is responsible for the validation of transactions on a blockchain network. The most used layer 1 consensus algorithm is proof of participation (POS), which forces validators to “put” their parts or tokens in order to validate the transactions. On the other hand, proof of work algorithms (POW) oblige minors to resolve complex mathematical puzzles to validate transactions.
Bitcoin SV (BSV)
Bitcoin SV (BSV) is a Bitcoin blockchain fork that was created by the developer team led by Sven Harjaneusson. BSV is designed to provide a more efficient and scalable alternative to the original Bitcoin protocol. A key feature of BSV is its use of the Lightning network, which allows fast and inexpensive transactions.
The main cases of using BSV include:
- High performance transactions : The Lightning network of BSV allows faster and cheaper transactions than traditional bitcoin, which makes it suitable for high frequency trading and other applications where speed is critical .
- Evolution
: The Consensus mechanism of layer 1 of BSV, combined with the Lightning network, makes it possible to treat a higher volume of transactions on the blockchain.
Comparison
Compared to other cryptocurrencies like Ethereum (ETH), ChainLink is positioned as a more specialized platform to provide real data to intelligent contracts. While the ETH is widely used to build decentralized applications (DAPP) and provide decentralized financing solutions (DEFI), ChainLink focuses on facilitation of predictions and specific professions.
On the other hand, Bitcoin SV focuses strongly on transactions and high performance scalability, which makes it suitable for applications that require quick and inexpensive treatment.
Conclusion
Decentralized finance (DEFI), combined with layer 1 consensus mechanisms such as proof of participation and the Lightning network, provides a powerful framework to create instruments and financial platforms. Oracle Network of Chainlink and the high performance transactions of BSV make them suitable for various use cases in DEFI applications and other blockchain applications.