DeFiChain (DFI): Native DeFi for Bitcoin Ecosystem

| Updated
by Beatrice Mastropietro · 6 min read
DeFiChain (DFI): Native DeFi for Bitcoin Ecosystem
Photo: Depositphotos

DeFiChain (DFI) is a project to provide a native DeFi experience for the Bitcoin ecosystem. By using DeFiChain, users will be able to take advantage of all the features and benefits that DeFi has to offer. In this guide, we will discuss DeFiChain in details and look at what it offers.

Currently, the Bitcoin (BTC) blockchain is not compatible with complex smart contracts and decentralized applications (dApps) as it is turing incomplete. However, this could change in the future with the development of new protocols such as Rootstock (RSK) that aim to bring smart contract functionality to Bitcoin. In the meantime, several projects are building DeFi platforms on top of Bitcoin that offer a wide range of features and services. One of them is DeFiChain (DFI), a native DeFi platform for the Bitcoin ecosystem.

DeFiChain (DFI) Explained

As mentioned above, DeFiChain is a decentralized finance platform that aims to provide native support for DeFi applications within the Bitcoin ecosystem, allowing users to access a wide range of financial services in a secure and trustless manner.

DeFiChain is a hard fork of the Bitcoin blockchain. It offers a variety of features and services, including:

  • Asset management. DeFiChain provides a safe and secure way to manage your assets. You can easily and securely add, remove, or transfer assets using the DeFiChain platform.
  • Trading. DeFiChain offers a decentralized exchange (DEX) that allows you to trade various assets, including cryptocurrencies, stablecoins, and decentralized assets.

In addition to providing DeFi services, DeFiChain also offers a number of other features that will make it an attractive proposition for Bitcoin users. These include:

1. Staking.
2. Liquidity mining.
3. Decentralized assets.
4. Enabling developers to build their dApps on a blockchain dedicated to DeFi.

The DeFiChain platform aims to solve the following problems:

  • Inefficient cryptocurrency exchanges. Centralized exchanges are often slow and charge high fees. DeFiChain’s DEX is fast and efficient, with low transaction fees.
  • Lack of scalability. The Bitcoin blockchain is not scalable and can only handle a limited number of transactions per second. Meanwhile, DeFiChain is built on the Bitcoin blockchain but is designed to be scalable, with the ability to handle up to 2,400 transactions per second.

DeFiChain Roadmap

The DeFiChain Foundation was founded in 2018 by Julian Hosp and U-Zyn Chua. Dr. Julian Hosp is a co-founder of Cake DeFi, a leading DeFi platform that gives you easy access to lucrative Decentralized Finance services. U-Zyn Chua is the CTO of the foundation and a core developer of Bitcoin Core. They created the whitepaper for DeFiChain, but later on, let the community govern the project.

The DeFiChain roadmap is divided into four phases:

  • Phase 1 (2018-2019) – launch and initial development. In 2018, the DeFiChain project was launched. Further, in 2019, the DeFiChain mainnet is launched.
  • Phase 2 (2020). The launch of a decentralized exchange took place.
  • Phase 3 (2021). In 2021, decentralized assets were launched.

The DeFiChain team has ambitious plans for the platform’s future, like integrating with popular wallets and exchanges, and developing new features and applications. The team is also working on expanding the platform’s reach to more countries and jurisdictions.

In the near term, DeFiChain plans to bring on-chain governance and launch DeFi Meta Chain, an EVM-compatible blockchain in parallel with the Native DeFiChain.

In the longer term, the team plans to turn DeFiChain into the go-to platform for decentralized finance.

DeFiChain has already got a strong start, with a growing community of users and developers. The platform has seen significant growth since its mainnet launch in June 2020, and the team is confident that it will continue to grow at an accelerated pace in the months and years to come.

How DeFiChain Works

DeFiChain is a DeFi platform with its own mainnet and tokens. Rather than relying on miners, DeFiChain uses a Proof-of-Stake (PoS) consensus mechanism.

With DeFiChain, users can create decentralized applications without worrying about the scalability issues plaguing Ethereum (ETH). DeFiChain can process up to 1,070 transactions per second.

DeFiChain is a Layer-1 blockchain solution that uses Bitcoin’s security model. It works by anchoring data to the Bitcoin blockchain using Merkle trees. This allows DeFiChain to scale without sacrificing security or decentralization. It works because when users want to add data to the DeFiChain, they must “commit” that data to the Bitcoin blockchain. They create a special transaction called a “Merkle proof.” This transaction contains the data the user wants to add and cryptographic proof that the data is valid.

Once the Merkle proof is confirmed on the Bitcoin blockchain, the data is considered “anchored.” From there, the data can be added to the DeFiChain and replicated across all nodes in the network. The benefit of this approach is that it allows DeFiChain to scale without compromising security. Since all data is anchored to the Bitcoin blockchain, no bad actors can tamper with the data or add invalid data to the chain.

Key Features of DeFiChain

Numerous key features distinguish DeFiChain from other protocols, making it a powerful platform for decentralized finance.

Firstly, DeFiChain offers the ability to tokenize any asset, including real-world and digital assets. This allows for the creation of various tokens representing different types of assets on the DeFiChain network.

Secondly, DeFiChain offers decentralized oracle pricing that allows for the accurate and up-to-date pricing of assets on the DeFiChain network. This ensures that users always have access to the most accurate price information when trading assets on the DeFiChain network.

These are just some of the key features that make DeFiChain a powerful platform for DeFi. With these features, DeFiChain can offer various financial services that anyone worldwide can use.

DeFiChain Applications

There are numerous use cases for DeFiChain. DeFiChain can be used to build decentralized versions of popular asset management services like lending and borrowing platforms, stablecoins, and synthetic assets. It also can be used to build decentralized payment processing platforms and digital wallets.

DeFiChain’s comprehensive suite of dApps enables anyone to securely manage their digital assets without reliance on a third party. The platform provides a safe and easy way for users to create, store, and trade digital assets while earning DFI rewards for participating in network security.

With DeFiChain, there is no need for a centralized exchange or custodian. Instead, users can interact directly with one another using the built-in atomic swap functionality.

DeFiChain also offers liquidity mining with multiple crypto- and token pairs, which lets users earn interest on their digital assets.

DFI Tokenomics

DFI token is the native token of the DeFiChain network. It is used to pay transaction fees and rewards on the DeFiChain network. DFItoken is also be used as collateral in vaults.

DFI is required to participate in DeFiChain’s proof-of-stake consensus mechanism. A portion of each transaction fee is automatically redistributed to validators (those who stake their DFI tokens to secure the network) in proportion to their stake.

Validators also receive rewards for successfully validating blocks, which are paid out from a pool of funds funded by a percentage of each block reward (the new DFI tokens created with each block). The remaining block reward is paid to the DeFiChain community fund, which can be used to fund the development and maintenance of the network.

Final Thoughts

DeFiChain is a project that can potentially increase the utility of Bitcoin. Interacting with decentralized applications will make Bitcoin more attractive to users and help it become more widely adopted. DeFiChain allows the creation of new financial products and services built on the Bitcoin blockchain.



What is DeFiChain?

DeFiChain is a decentralized finance platform that aims to provide native support for DeFi applications within the Bitcoin ecosystem, allowing users to access a wide range of financial services in a secure and trustless manner.

What issues does DeFiChain address?

Bitcoin is the first and most widely recognized cryptocurrency; however, it is not well suited for use in smart contracts and decentralized applications (dApps). Bitcoin’s design means it is impossible to write code that can run on the Bitcoin blockchain. This limitation has prevented the development of a vibrant ecosystem of dApps on Bitcoin, limiting its utility. DeFiChain addresses this problem by providing a second-layer solution that runs on top of Bitcoin. DeFiChain offers all the benefits of a decentralized innovative contract platform without compromising security or decentralization.

How does DeFiChain work?

DeFiChain works by pegging its value to that of Bitcoin, meaning that an equivalent amount of BTC backs each DFI coin. This makes it possible to use DeFiChain as a collateral asset in Bitcoin’s Lightning Network, allowing users to earn interest on their holdings while still transacting quickly and cheaply. DeFiChain also has its decentralized exchange, allowing users to trade DFI coins for other assets without going through a centralized exchange. This makes it easy to convert your DFI coins into other assets or to use them to take out loans in the form of smart contracts.

Who created DeFiChain?

The DeFiChain Foundation was established in November 2019, it owns all DeFiChain (DFI) trademarks and domains. The organization is responsible for developing the ecosystem, forging new partnerships, guiding the development of tools for partners, and overseeing DFI funds. At the project’s origins are two key figures: Julian Hosp and U-Zyn Chua.

What are the use cases for DeFiChain?

DeFiChain is a native decentralized finance platform for the Bitcoin ecosystem that enables users to securely and seamlessly loan, borrow, and trade digital assets without counterparty risk. DeFiChain can be used to create loans and borrowings without needing to trust a centralized lending platform, trade digital assets in a decentralized manner without counterparty risk, manage digital asset portfolios in a secure and decentralized way, and provide liquidity to decentralized exchanges (DEXes).

What is DFI?

DFI is the native token of the DeFiChain network. It is used to power all network transactions and gives holders a share of the fees generated by applications built on DeFiChain.

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