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A DeFi application (Dapp) is simply an application that supports decentralized financial activities. Dapps are applications designed using the Smart contract protocol on the Ethereum Blockchain. This enables it to carry out functions without being controlled by a central body. This simply means the activities are controlled by a pre-encoded rules of function (smart contract) and the consumers themselves.
As required in the homework task, the following Dapps would be explained briefly
- Maker
- Compound
- Synthetic
- Bzx
- Uniswap
Maker
Maker is an application that belongs to the MakerDAO. MakerDAO simply means Maker Decentralized Autonomous Organization. This is a decentralized finance project that was built on the Ethereum Blockchain using smart contract to autonomously execute transactions without being monitored by a regulatory central body.
MakerDAO is centered on borrowing, savings and stabilized cryptocurrency on the Ethereum Blockchain. Maker makes use of a stabilized token called Dai. Dai being a stabilized coin (stablecoin) means it has a stable value or price. This is achieved by pairing it to the US dollars. That is 1 Dai = 1USD.
The Maker allows funds to be borrowed in form of Dai. In order to obtain Dai, a certain amount of digital asset of equivalence would have to be deposited into the system as collateral. This works as borrowing the Dai as loan and securing it with the deposited digital asset (e.g Ether) which is serving as collateral.
One unique feature of the MakerDAO is its autonomous manner of stabilizing Dai. The Dai is set to collateralat a value equivalent to 1USD. However, the amount of Dai in circulation is backed by a certain amount of digital asset (Ether) held in the system as collateral. As the price of this asset fluctuates, it threatens to destabilize Dai (which should not happen).
The Maker algorithm respond to these fluctuations automatically: creating new Dai if the Ether grows stronger, and on the other hand liquidate collateral asset when price of Ether slipped down. The Maker also uses the MKR token to stabilize price of Dai in critical conditions where Ether slipped heavily within a very short period.
Compound
Compound is another Dapp that enables people to carry out financial activities without an intermediary. It is built on the Ethereum Blockchain and uses smart contract for it functions. Compound focuses on lending and borrowing of crypto assets and earning interest. This means anybody with crypto assets can lend out or borrow with interest.
The system works the same as the traditional lending and borrowing of money but the interesting thing here is that, there is no intermediary, no know your consumer or anti-laundery scheme- and this defines it as a Decentralized system.
In order to use compound, either to lend or borrow, there is a demand of digital asset that would be locked up in this system as collateral. As a lender, you earn interest based on the value of collateral you've deposited; and as the borrower the value of collateral deposited determines how much you can borrow. The amount you can borrow would surely be below the value of collateral provided.
The interest rates on Compound is based on the damand and supply in the system. When a lender puts funds into the asset pool, the Compound native token known as cToken is generated. cToken automatically generates interest which can be redeemed anytime. Compound deals with variety of digital assets such as Dai, ETH, USD coin (USDC), USD Token (USDT) etc
The Compound also generates and distribute COMP token to its users as incentives for using the platform. The COMP token gives its users a right of a say in the governance of the system.
Uniswap
Uniswap is a decentralized finance project on the Ethereum Blockchain. It is basically a Decentralized Exchange (DEX) that supports exchange of tokens on the Ethereum network. In contrast to the centralized exchange, it has no governing body that controls financial activities. It functions by smart contract which automatically coordinates activities.
Uniswap runs two types of smart contracts: An Exchange smart contract that facilitates exchange of tokens on the platform; and a Factory smart contract which facilitates the incorporation of new tokens into the system.
As a Decentralized Exchange, Uniswap provides some benefits to its users, for example: User control, uncensored transactions and simple user friendly interface.
Apart from the above mentioned, Uniswap goes some step further in solving liquidity problem of the decentralized exchange. It introduced the Automated Market Marker(AMM). protocol that automatically determines exchange rate of tokens by mathematical computation rather than the traditional demand/supply market factor.
Uniswap uses a pool reserve for every token supported on the network. These pools are being funded by users, who in return gain incentives.
In Uniswap, a buyer does not have to queue waiting to be paired up with a corresponding seller but rather have transactions carried out using funds in the pool reserves.
Due to its beneficial features, uniswap is one of the leading decentralized exchange in handling crypto assets.
BZx
BZx is a Decentralized finance project that is integrated with the Ox protocol that allows people to lend and trade margin. BZx was built on the Ethereum Blockchain and uses smart Contract to autonomously execute financial activities. BZx is decentralized as no third party is involved in monitoring these financial activities.
The BZx makes use of three different tokens: iToken, pToken and BZRx. These three tokens determines the functionality of the system.
When lending, the lender deposits an amount of digital asset into the pool reserve. The lender is issued with an equivalent value of iTokens which automatically generates interest.
On the other hand, a borrower would borrow asset from the pool reserve to trade margin. The pToken is issued to the borrower, these token defines the borrower's position on the margin. This token defines his position in the margin trade. In margin trade, a person is able to trade with a borrowed capital in order to obtain a high return. The third type of token, BZRx is not used for trading but it's intended to be used as voting power in governance of the system.
BDx has two front interface: Fulcrum and Torque. Fulcrum supports the lending and borrowing of funds for margin trading while Torque supports using borrowed funds for whatever functional.
Synthetix
The Synthetix is a decentralized finance project that allows people to bet on assets like crypto, stock, fiat and other assets in form of ERC20 token. These synthetic tokens mimic the worth and price of assets in the real world. Synthetix partners with Chainlink with their decentralized oracle protocol that provides feeds on prices of commodities.
Synthetix makes use of two types of tokens: Synthetix Network Tokens (SNX) and Synthetic assets (Synth). The SNX are held in the system as collateral to produce a synthetic token. The two tokens a ERC20 and they are transferable between Dapps.
However, it is good to note that having a synthetic of a particular commodity or asset doesn't mean you literarily own the underlying asset.
The SNX can be stacked to generate varieties of syntha nd this is done on the Mintr Dapp.
Conclusion
The innovation of different decentralized finance projects and development of Mind blowing Dapps has shown how much the world crave for a perfect and completely decentralized finance system.
Thank you
@yohan2on