DeFi Series – Webinar 3 – The DeFi Use Cases (DEX, Lending)

Zeeve organized an event titled: “The DeFi Use Cases (DEX, Lending).”

Dr. Ravi Chamria, CEO and Co-Founder of Zeeve, starts the webinar by briefly introducing Zeeve and its role in the blockchain technology space. He then dives into the major topics of the webinar, which cover two use cases in decentralized finance (DeFi) – decentralized exchanges and lending protocols. He also discusses the benefits and challenges of lending protocols in the DeFi space.

The webinar delves into the differences between centralized and decentralized exchanges. Centralized exchanges hold custody of digital assets, while decentralized exchanges enable peer-to-peer trading without intermediaries.

Dr.Ravi explains how transactions are transparent and recorded on the underlying blockchain protocol and decentralized exchanges work through order books and order matching, with the most established model being the automated Market maker model.

He also discusses centralized versus decentralized exchanges in the context of DeFi.He notes that centralized exchanges are more popular due to their better UX/UI experience, but decentralized exchanges are gaining popularity. A fee is charged in centralized and decentralized exchanges, but the business model varies.

Moreover, Dr.Ravi explains that decentralized exchanges use automated market makers (AMMs), such as UniSwap and PancakeSwap, which work on a liquidity basis to provide the best pricing options for users.

The concept of liquidity pools is discussed by Dr.Ravi as a solution to the challenge of matching trade options for buyers and sellers in decentralized exchanges.

He also describes that liquidity providers receive LP tokens as a receipt for providing liquidity, which can be exchanged for their original assets and a substantial portion of the transaction fee earned from trades.

Dex aggregators are a solution to slippage, which occurs when liquidity for a paired pool is disturbed, leading to losses. The benefits and risks of using a decentralized exchange are explained. Decentralized exchanges offer security, privacy, and no centralized entity holding custody of assets.

He also explains that risks are associated with poor liquidity, smart contract vulnerabilities, and token bridge challenges. Despite these risks, the market has matured, and smarter interoperability platforms are coming in to solve these issues.

Dr.Ravi mentions some of the problems decentralized exchanges (DEXs) face, including front-running problems and scaling issues. He adds that DEXs have seen great traction and widespread acceptance within the crypto community despite these challenges. He also suggests that their relatively small market needs more regulatory framework and user experience.

He then briefs about DeFi lending and how it aims to solve cryptocurrency’s long and drawn-out borrowing process by offering collateralized lending. He explains that decentralized lending platforms like Aave and Compound are smart-contract-driven, and users can connect their wallets as liquidity providers or borrowers who pay interest.

Dr. Ravi further discusses decentralized lending and borrowing platforms in DeFi. He adds that borrowers pay interest and put in more collateral, while lenders earn interest and provide liquidity.

Dr.Ravi even explains how tokenized assets bring a new and innovative approach to the traditional mortgage lending process, and the platform remains efficient and offers a range of additional benefits like margin trading or liquid staking.

Lastly, he discusses the differences between traditional and decentralized finance systems. While traditional systems involve intermediaries such as banks and settlement platforms, decentralized finance is a direct user-to-user system that uses transaction liquidity pools. He also adds how various financial products are built into decentralized finance, including investment-related Dows, portfolio management platforms, and infrastructure products.