➡️ What is Nexen Finance? | A Detailed Defi Guide.
Before discussing Nexen Finance, let’s first get to know what exactly Defi is. Defi is the future of finance and the year 2020 is already considered to be a year of Decentralized Finance, where it gets importance and acceptability in the market. So, it’s important to know the concept of this term.
With Defi (decentralized finance), anyone in the world, anytime and from anywhere, can send money to another person for a little fee eradicating the middlemen. The objective of Defi is to give users full control of assets through decentralization and blockchain technology. As it is an open-source platform, developers can build more and more financial products with the help of collaborating with people across the globe which leads to nimble innovation and a secure network.
Anyone in the world, from anywhere, can store, trade, and invest their assets in blockchain securely and earn a much higher return than from the traditional financial system. As there is no central authority in handling your asset, you have complete authority and control over your investments
Decentralized Finance vs. Traditional Finance
The conventional banking system is uncertain now due to Friction, inaccessibility, and regulatory issues plaguing the current banking system. Unfortunately, not everyone is privileged to be banked in the current financial system — it is tough for the unbanked to compete on a level field. The Defi aims to bridge these gaps, and making finance to be accessible to everyone without any form of central authority and censorship. In short, Defi creating the platform of opportunities and permitting users to access various financial instruments without any restriction on race, religion, age, nationality, or geography. While comparing both traditional and decentralized financial products, there will be advantages and disadvantages on each side.
Nexen functions as a liquidity pool on the Ethereum Blockchain. Lenders supply the assets to the pool and earn yield, in contrast, borrowers take a loan from the pool and pay interest on their debt. This way, Nexen fills up the missing gaps between lenders who wish to accrue interest from idle funds and borrowers who wish to borrow loans for productive or investment purposes. In Nexen, interest rates are defined by borrowers, based on the LTV (loan to value) that they choose. If they send a higher collateral, they get a lower interest in return.
How can I benefit from Defi?
Defi is setting up an unprecedented example for the traditional financial and banking system. Defi is a nifty financial landscape with the help of the internet and blockchain technology. The three main segments which would get the benefit from the Defi network are, payment clearance system(remittances), accessibility, and centralization transparency.
Payment Clearance System
If you tried to send money to someone in another country you surely face some issues. Banks typically take a few or a couple of days to transfer money and include all sorts of charges. There are others issues as well like documentation, compliance with money laundering laws, and privacy concerns. For example: If Alice wants to send 1000$ from the USA to Casper who lives in Australia this would involve three fees, the exchange rate from the bank, inbound international fees, and outbound international fees. In last it would require few days for the payment to be transferred to the Casper bank account. Now with the help of Cryptocurrencies, all the intermediaries would be eradicated such as banks. It quicker and the transfer of money would be proceeded with no question with relatively lower fees compared to banks. The transfer of cryptocurrencies anywhere in the world would require 15 seconds to 5 minutes depending upon several factors along with a small fee.
More than 1.7 billion people in the world are unbanked and cannot access financial services. But with the help of Defi and Dapps, these people would get the facilities for getting the financial products. Defi seeks to push cross-border, censorship-free, and accessible financial products for all the people. Defi does not show discrimination to any particular race, gender, religion, age, or nation instead providing the playing field for everyone.
There is no denying that conventional, regulated financial institutions that adhere to government laws and regulations such as banks are some of the most secure and safe places to store funds. But they are not without a forge. Even renowned banks can fail. Washington Mutual with over $188 billion in deposits and Lehman Brothers with $639 billion in assets have both failed in 2008. In the US alone, over 500 bank failures have been recorded. Some of the events leading up to the 2008 financial crisis included credit rating agencies giving AAA ratings (best & safest investments) to high-risk mortgage-backed securities. The 2008 financial crisis give birth to novice ideas to the world. Defi is one of them. Defi protocols developed on top of permissionless public blockchains such as Ethereum are mostly open-sourced for audit and transparency purposes. They usually have decentralized governing organizations to ensure that everyone knows what is happening and that no vice actors can single-handedly make bad decisions.
Defi protocols are written as lines of codes — you can’t modify, alter or cheat the codes as it treats every participant equally without discrimination. The codes run exactly as they are programmed to, and any 4 flaws quickly become evident as it is open for public scrutiny. The biggest strength of Defi relies on its ability to quell the intermediaries and operate with zero censorship.
What are the benefits of Dapps?
Dapps are built on top of decentralized blockchain networks such as Ethereum and usually have the following benefits:
🔹 Immutability: Nobody can change any information once it’s on the blockchain.
🔹 Tamper-proof: Smart contracts published onto the blockchain cannot be tampered with without alerting every other participant on the blockchain.
🔹 Transparent: Smart contracts powering Dapps are openly auditable.
🔹 Availability: As long as the Ethereum network remains active, Dapps built on it will remain active and usable.
Defi Key Categories
🔹 Stablecoins: The prices of cryptocurrencies are known to be extremely volatile. It is common for cryptocurrencies to have intraday swings of over 10%. To mitigate this volatility, stable coins that are pegged to other stable assets such as the USD were created. Tether (USDT) was one of the first centralized stablecoins to be introduced. Every USDT is supposedly backed by $1 in the issuer’s bank account. However, one major downside to USDT is that users need to trust that the USD reserves are fully collateralized and exist. Decentralized stablecoins aim to solve this trust issue. Decentralized stablecoins are created in a decentralized manner via an over-collateralization method, operate fully on decentralized ledgers, are governed by decentralized autonomous organizations, and their reserves can be publicly audited by anyone. While stablecoins are not financial applications themselves, they are important in making Defi applications more accessible to everyone by having a stable store of value. Lending and Borrowing Traditional financial systems require users to have bank accounts to utilize their services, a luxury that 1.7 billion people currently do not have. Borrowing from banks comes with other restrictions such as having a good credit score and having sufficient collateral to convince the banks that one is creditworthy and able to repay a loan. Decentralized lending and borrowing remove this barrier, allowing anyone to collateralize their digital assets and use this to obtain loans.
One can also earn a yield on their assets and participate in the lending market by contributing to lending pools and earning interest on these assets. With decentralized lending and borrowing, there is no need for a bank account or a credit-worthiness check. Exchanges To exchange one cryptocurrency to another, 5 one can use exchanges such as Coinbase or Binance. Exchanges like these are centralized exchanges, meaning they are both the intermediaries and custodians of the assets being traded. Users of these exchanges do not have full control of their assets, putting their assets at risk in case the exchanges get hacked and are unable to repay their obligations. Decentralized exchanges aim to solve this issue by allowing users to exchange cryptocurrencies without giving up custody of their coins. Without storing any funds on centralized exchanges, users do not need to trust the exchanges to stay solvent.
🔹 Fund management: is the process of overseeing your assets and managing its cash flow to generate a return on your investments. There are two main types of fund management — active and passive fund management. Active fund management has a management team making investment decisions to beat a particular benchmark such as the S&P 500. Passive fund management does not have a management team but is designed in such a way to mimic the performance of a particular benchmark as closely as possible. In Defi, some projects have started to allow for passive fund management to take place in a decentralized manner. The transparency of Defi makes it easy for users to track how their funds are being managed and understand the cost they will be paying.
Defi should not only prove to be faster and cheaper than traditional banking but at the same time it will open up new possibilities for improved treasury management. Liquidity mining is one way that businesses could put their unused capital to greater use. Lending is another.
Do I need to register for an account to start using Nexen?
No, you don’t have to register for an account and that’s the advantage of decentralized Finance applications. Unlike the conventional financial applications where users are required to go through a lengthy process to get started, in Nexen, users don’t need to register for anything. Anyone with a cryptocurrency wallet such as Metamask can commence using Nexen immediately.
To earn interest, you will have to supply assets to the protocol. After depositing assets into Nexen, you can create a lending request to immediately begin to earn interest on the assets you have put in.
Lending, borrowing, staking, and now farming features are live and working. The total supply of Nexen tokens is only 10 million, where 8 million are already locked in a Vesting Contract. If you are interested in the Defi domain, then it would be better to take one step forward towards this opportunity.
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