DeFi yield farming has become overwhelmingly popular in the blockchain space with investors chasing after projects with high returns. Developers and finance experts on the other hand have responded by continuously launching new projects to meet the rising demand. Still the market feels underserved with the total value of funds locked in DeFi projects standing at $7.81 billion according to DeFiPulse. This is only a small fraction of the entire crypto market capitalization that is in the excess of $200 billion.
There is a lot of desire from crypto developers and finance industry experts to boost the capacity of DeFi through the development of even more products. On an even more grander scale, the focus of the blockchain community is to overhaul the existing centralised financial system. This can only be achieved through a robust expansion of the DeFi sector that will then serve as a springboard for the establishment of a completely decentralised financial system. However, there exists some obstacles that are curtailing the smooth implementation of this new system. Issues such as insufficient liquidity, scalability and poor interoperability between blockchains are stifling development in the DeFi sector.
The poor interoperability between blockchains is particularly a major problem for blockchains as each is designed to function as a network on its own. Developers of these separate networks have often ignored standards while building the blockchain thus causing interoperability. This results in communication issues as the networks are not able to talk to each other. This challenge is manifested at the end user point as investors are not able to access all the DeFi products on a single platform. Instead yield farmers are shuttling across multiple platforms in order to participate in the DeFi of choice.
Dfinance is working to solve this challenge of interoperability by introducing a solution that enables cross-chain communication. The Dfinance platform is a standardised protocol that allows blockchains to talk to each other without the need for a third party. This novel solution is built on the Cosmos blockchain which employs the Tendermint Proof-of-Stake for consensus mechanism. The tendermint core is common across multiple blockchains and will play a critical role in enabling the cross-chain communication functionality.
Additionally, Dfinance is building a layer 2 network with proper infrastructure that enables developers to create decentralised financial instruments without necessarily having programming skills. This is enabled by the Cosmos SDK developer platform that employs the Golang programming language that is quite easy to apply. Dfinance hopes that developers and financial experts will take advantage of this innovative platform to create tools and products that will take DeFi to the next level.
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