The Role of Kyber Network
Applications using Ethereum continue to be developed around the world.
For example, Brave and MakerDAO, which can be learned through PoL, have also been developed using Ethereum.
The development of many such services has led to the creation of many unique cryptocurrencies that are used in those services.
These include "BAT" for Brave, and "DAI" and "MKR" for MakerDAO.
Since these cryptocurrencies are used for different services, problems began to arise, for example, DAI could not be used in situations where BAT could be used.
This is why Kyber Network was developed.
Kyber Network, like Brave and MakerDAO, is a service developed using Ethereum.
It connects services developed using Ethereum so that different cryptocurrencies can be exchanged, lent, and transferred seamlessly.
For example, through the Kyber Network, you can send money in BAT, but the recipient will receive it in DAI.
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Let's learn about DeFi using Ethereum
Among the services that use Ethereum, the financial sector has been rapidly gaining momentum in recent years.
The financial system built on the blockchain is collectively called DeFi (Decentralized Finance).
It is so called because there is no specific administrator like in the existing financial system.
DeFi is expected to do what existing financial institutions such as banks and securities companies cannot do.
The three main features of DeFi are as follows
- Freedom to develop financial services
- Free access to financial services
- Financial services will be automated and more efficient.
Since Ethereum is a public chain, developers are free to develop services using Ethereum.
Financial services that were previously difficult for individuals to develop can now be developed freely using the blockchain.
Existing financial services require huge initial investments to obtain licenses and strengthen security, and are not something that individuals can develop freely.
However, blockchain is a platform that is open to all, and no one can stop the development that takes place there.
The more talented individual developers that enter the market, the more opportunities there are for better services to be created.
DeFi will open up access to the financial system to the entire world.
For example, people who do not have a bank account can obtain cryptocurrency as long as they have access to the Internet, and they can use the DeFi service to access various financial systems.
Not only can you simply hold bitcoins, but you can also use your bitcoin holdings to invest in assets or buy insurance.
DeFi is also unique in that it can automate transactions.
By using Ethereum, smart contracts can be utilized, making it possible to buy and sell, lend and borrow, and deposit cryptocurrencies without fraud and without fail.
This will also make it possible to build a cheaper service compared to existing financial systems that have been done manually.
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Let's get to know a concrete example of DeFi supported by Kyber Network
Let's take a look at some specific examples of how the Kyber Network will work in DeFi, which has the potential to revolutionize society.
Stablecoin Exchange
As you will learn in the MakerDAO curriculum, there is a growing demand for stablecoins like DAI to replace volatile cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH).
If you want to exchange ETH for DAI and vice versa, you can do so quickly by utilizing the Kyber Network.
Since there are many ETH and DAI stored in the Kyber Network, they can be quickly exchanged into different cryptocurrencies at any time by using the Kyber Network as an intermediary.
Collateral for cryptocurrency lending
In recent years, services that allow users to lend and borrow cryptocurrencies have grown significantly in DeFi.
In general, when borrowing cryptocurrencies, you need to deposit cryptocurrencies such as ETH as collateral.
If the borrowed cryptocurrency is not returned, the assets deposited as collateral will be confiscated.
In this situation, by using Kyber Network, the service provider can maintain the system without increasing the loss, because even if the value of the assets deposited as collateral drops below the value of the assets lent, the collateral assets can be sold immediately via Kyber Network.
Mutual Funds
Some DeFi services can automatically execute complex investment strategies in cryptocurrencies.
A portfolio is automatically created, and when it reaches a predetermined price, it uses the increased value of the cryptocurrency to buy another cryptocurrency at a lower price.
The Kyber Network is used to perform this process automatically and reliably.
The Kyber Network can be used to exchange different cryptocurrencies at any time, which is useful in such automated execution situations.
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