Amidst the surge of the Covid-19 pandemic in many parts of the world last year, there was an unprecedented increase in the demand for digitized solutions worldwide. E-commerce, e-meetings, online workplaces, and many digital solutions sprouted from every corner of the world. Most notably, the financial industry has been undergoing a massive shift with the rise of decentralizedd finance (DeFi), moving hand-in-hand with developments in cryptocurrency.
In fact, cryptocurrencies have played a huge role in digitization and decentralization since Satoshi wrote the first blockchain whitepaper. However, it wasn’t until the pandemic progressed and demand for digitization and insurance against failing economies and traditional assets increased, that individuals and institutions turned to cryptocurrencies on a never-before-seen scale.
That’s how over the past few months, bitcoin and other cryptocurrencies have managed to reach new all-time highs, and besides the pandemi, new use cases with legitimate utility have been a major reason behind the bull run.
Decentralized finance, which first entered the scene in 2017, quickly rose to popularity amidst the pandemic, and in hindsight–it’s no surprise. After all, DeFi has brought the whole package of financial services like lending, borrowing, saving and investing onto blockchain networks, and has eliminated inefficient financial intermediation in the process. With DeFi, anyone with internet services can control their financial assets (cryptocurrency) and even earn much higher yields on them than in traditional finance. This way, both the unbanked and underbanked populace can participate in a fair economic system.
DeFi tools and their evolution
While decentralized finance may be one of the biggest driving forces in the crypto bull run and the public acceptance of cryptocurrencies, it is still a segment in development. Over recent years, several DeFi product niches like smart contracts, liquidity pools, yield farms and even stablecoins have been tweaked for better optimization by different developers. The emergence of the Binance smart chain (BSC) and layer-2 solutions to compete with and improve on Ethereum’s inefficiencies is one significant example.
The segment of Stablecoins is another area with immense promise. The stablecoin, Tether (USDT), is the most popular and the largest stablecoin by market capitalization and has been one of the largest contributors to DeFi liquidity pools. The primary reason is found in its name–stable; The volatility of crypto assets makes Tether a safer alternative to perform banking functions. However, Tether has been scrutinized for various reasons in the past couple of years, and new and better stablecoin alternatives are quickly emerging.
Wault finance and the commerce-backed stablecoin project
Wault finance is a community-driven decentralized protocol that emerged a few months ago in the DeFi space. As one of the first true cross-chain platforms, Waultt has grown enormously while offering multiple solutions to achieve a fast-growing decentralized ecosystem. These days, Wault is one of the largest platforms on BSC and Polygon where the ecosystem is based.
WUSD, the stablecoin developed by the protocol, is a unique solution that solves the volatility and over-collateralization problems of fiat-backed and crypto-backed stablecoin models without having to rely on non-crypto intermediary institutions like USDT. In simpler terms, WUSD is a careful research-based stablecoin pegged to the USD that has found a model which possesses the strengths of various stablecoin types without their weaknesses. Partially crypto-backed, yet improving on the instability of previous algorithmic stablecoins, WUSD possesses a new model as the first commerce-backed stablecoin. What this means is that WUSD is backed by a treasury, fully redeemable at any time. However, it does not try to extend its capital efficiency by inventing a governance token out of thin air like FRAX, but rather maintains a stable price through stability mechanisms that are reinforced by the ongoing commerce of the Wault platform.
In other words, the commerce-backed stablecoin’s peg is guaranteed by the active commerce within the Wswap DEX that is increasingly popular on both BSC and polygon. While the new stablecoin model would initially be collateralized 90% in USDT, the WEX token would be the active commerce element for the token and make up the remaining 10%. To put this in perspective, the WEX token is not a new token out of thin air; it has tens of millions of dollars in market capitalization already.
For every USDT deposit, 10% or 0.1 USDT will go towards purchasing and holding WEX in the treasury along with USDT; this way, the stablecoin would be 100% redeemable at any time. Rather than minting or burning the internal tokens(a potential vulnerability loophole DeFi protocols have faced), WUSD will use stability mechanisms such as the treasury, trading fee support, WUSD staking and emission support to make the stablecoin sturdy enough against market fluctuations.
Wault finance, a community-driven ecosystem
Since its launch in early 2021, Wault has quickly grown to become one of the largest and fastest-growing ecosystems on BSC and Polygon. From a scrutinous perspective, this is not much of a surprise, since the Wault DEX, Wswap, has the lowest fees (0.2%) on both networks. WaultSwap also allows users to provide liquidity in their pools to earn up to 300% in annual percentage yields (APYs) on both farms.
Yet, perhaps the most exciting of the ecosystem’s features is the 100% redistribution of protocol profits to the community. Through initiatives like this, Wault has shown a constant commitment to fully decentralizing every one of its features, including the native WEX token, the WEXpoly token, the WaultSwap DEX and the Wault Launchpad.
Undoubtedly, the clamor for decentralization in finance would create a better free and fair ecosystem where participants have a level playing field, and Wault is a proponent of this philosophy. While many projects have already existed and some are fading away, Wault has been a stellar example of how to lay a strong community-based groundwork for decentralized protocols within a short period.
David is a crypto enthusiast and an expert in personal finance. He has created numerous publications for different platforms. He loves to explore new things, and that’s how he discovered blockchain in the first place.