Defi, Finance, Or Decentralized Investing Platform?
The growth of Decentralized investment platform, pioneered in recent years by Ethereum, Bitcoin, and other networks, has been labeled in various ways. There are many topics to consider, from tokens to blockchain technology while building a decentralized investing platform, but don’t worry; we’ll break them down for you in this piece.
If you believe that Defi began with creating cryptocurrencies, you are correct, but the concept has evolved significantly.
What are decentralized investment platform, how do they work, and how have they changed over time? We’ve come to tell you something.
Some Basics Before You Start
Blockchain technology (chain of blocks): a distributed database formed by a series of blocks that prevent modifying the information contained therein once published. The blockchain can be private (limited to nodes) or public (without reading the data). This is possible thanks to peer-to-peer (P2P) networks.
It is a digital asset or unit of value hosted on a blockchain, allowing the owner to attribute it to a third party through the chain. Your weight may contain multiple layers
is a decentralized, open-source platform that will enable you to create smart contracts. It uses the Ether token, with which it can execute these contracts.
It is a virtual currency or digital medium of exchange used on public blockchains—examples: Ether or Bitcoin.
What Is Decentralized Investment Platform?
Technically, this concept is born from blockchain technology to eliminate intermediaries and allow people to control their finances directly with smart contracts protocols.
How Does Blockchain Technology Work In Sending A Transaction?
Suppose you already have a digital wallet with Bitcoins. And you are going to make a simple transaction with this currency to another user of the network. Both of you already have the corresponding software to access the Bitcoin blockchain and the keys used to sign and decrypt the messages sent. The operation of the system is as follows:
- You propose a transaction to the other nodes (sending Bitcoins from your account to someone else’s).
- It’s unique. This message receiv in encrypt form by the nodes that verify the sending of that proposal. If everything is correct. The nodes calculate the hash (specific element of each transaction) to identify this operation individually.
- The verified transaction will include in a block. Which also contains the information of the last transactions of the previous block. The timestamp, the value of the nonce, and the value of the Merkle root.
- The blockchain immutably stores information in blocks. Blocks will create network nodes participating in the data writing process to receive a financial reward.
- For a block to will accepte, the miner must be the first to complete the Proof-of-Work (PoW) proof of work. This proof hinders the activity of possible attackers thanks to its cryptographic nature.
This is the essential operation of a cryptocurrency money transaction through blockchain technology. But the applications of the blockchain have gone much further. Also We can Download Asset Tokenization
From Means Of Payment To Exchange Value
Indeed, the blockchain ecosystem will create as a means of payment. As with Bitcoin, but virtual assets have evolved to become an exchange value in different scenarios. For example, decentralized investment through Ethereum.
Its main difference with payment method networks is that it allows transactions beyond payment thanks to the presence of smart contracts or smart contracts.
The development of decentralized investment platform offers the opportunity to create a token or digital asset that grants the right to obtain different benefits. We know it as tokenization or division of an asset into other parts. In the case of a property. Such as a building, the support cannot divide, so a representative token will creat.
Consequently, something with a lot of value can will distribut among many people and have more liquidity in the market.
When To Resort To The Creation Of A Decentralized Investment Platform?
Following the example of tokenizing a building to get investors and profitability. You need a platform that manages the property and allows investors to make their contributions and an EAF agent that signs the issues of the property’s tokens. This platform could centraliz or decentralized.
If it will centralize, users will deposit the money to buy the tokens, as with most exchanges. And for this, you will need a virtual money institution to provide you with an escrow account, which implies a higher cost and security risk since it has all your assets.
If it will decentraliz, the usability will reduce. Bt the costs are much lower. And the assets are in the electronic wallets of each user, so it is much safer. Purchases on decentralized investment platforms Wii make with cryptocurrencies from your wallet or the integrated platform.
Despite their differences, both platforms work on the same background: investors must do a KYC (identify the investor to comply with the money laundering law). And a suitability test (check that the person knows what he does) before buying.
What Are Other Factors Involve In The Decentralized Investment Platform
We have compiled some essential requirements to consider in the process:
- Development of the smart contract of the security token. It is in charge of controlling the issuance of the permits and their shipment.
- Manage the distribution of profits of investors.
- Choose the blockchain that you will use in the development, keeping in mind that each has its advantages and disadvantages. The two most used are Ethereum and Binance Smart Chain.
- Also Read: Entrepreneurial Businesses: Tips to Stay Focused
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