Imagine if you will...
The future of decentralized finance (DeFi) may find its home with the NEAR Protocol. With NEAR's Ethereum Virtual Machine (EVM) testnet going public by the end of March, NEAR may be coming closer to fulfilling its destiny as the "Ethereum-killer."
So what could the DeFi ecosystem look like in the NEAR future? Let's take a look at a few key projects and digital currencies that could bring us a great leap forward.
The NEAR Protocol
NEAR is a proof-of-stake blockchain that offers fast speeds (one-second block times), cheap transacting, scalability, personalized wallet names, and native smart contracts.
As GAS costs continue to skyrocket on Ethereum and dampen enthusiasm and new adoption, NEAR offers users transfer fees that are 1000 to 10,000 times cheaper than Ethereum's GAS fees. In addition to fees being extremely low and speeds being more than ten times faster than Ethereum, the transfer fees are automatically burned, reassuring any stakeholders and assuaging their concerns about inflation.
As users seek better and less-costly options, developers are also taking advantage of providing those options outside of the Ethereum ecosystem. Active developers and development with the NEAR Protocol has been increasing at a strong and steady pace. The list of integrations and projects coming to NEAR continues to steadily grow.
Partnerships and Integrations
Since last summer, some big names in digital assets, and in particular, DeFi, have announced integrations, partnerships, and other plans with NEAR.
Decentralized applications on NEAR are using Chainlink's oracle services. These oracles are a key component for DeFi pricing data and will help build up NEAR's growing financial networks.
In addition to Chainlink's oracles, The Graph just recently announced integration with NEAR. With The Graph's integration, developers will be able to connect to open APIs and have better access to blockchain querying and indexing. This further adds to the data available for DeFi projects and will allow for more rapid expansion of the ecosystem.
Balancer, an automated market maker (AMM), is also bringing their decentralized exchange (DEX) services to the NEAR Protocol. There has also been talk of Aave, an open-source DeFi collateral platform on Ethereum, developing a version of their non-custodial marketplace for NEAR. Cheaper, low-latency DeFi platforms would undoubtedly attract a large amount of liquidity providers that are seeking better returns on their investments.
The Future of DeFi
With oracles, querying and indexing, liquidity pools, decentralized exchanges, token creation, and prediction markets all taking shape around NEAR's growing network, the environment is primed for further financial development.
But the best part of NEAR is that you don't need to choose between NEAR or Ethereum. NEAR's Rainbow Bridge is designed to work with both blockchains in order to make asset transfers seamless. The trustless Rainbow Bridge will provide a gateway to send ERC20 tokens between both blockchains in either direction, opening up both chains to the assets and the users of the other.
What does this mean for the future of DeFi?
Ampleforth (AMPL) is an ERC20 token on Ethereum. It's described as "an independent financial primitive that does not rely on centralized collateral or lenders of last resort. It's like Bitcoin, except it can be used in contracts."
Ampleforth attempts to stabilize its price by increasing and decreasing its daily supply through a mechanic called "rebasing." The AMPL algorithm is fed by Chainlink oracles that report the U.S. Dollar's 2019 value according to the Consumer Price Index (CPI).
If the average daily weighted AMPL price is too high above the algorithm's target price, then supply is increased to meet the demand of the digital currency markets. If the price is too low, then supply is decreased. Tokens in all wallets across the network are automatically adjusted accordingly, such that every token holder never loses their network share of AMPL tokens through the rebase function.
If the AMPL market price is within the acceptable range of the oracle-fed price, then it is in "equilibrium" and no rebase occurs for that day.
The algorithm-based adjustments allow the currency to be completely free of debt, lenders, and third-party trust in order to achieve its stability. Economic expansion can occur naturally while the supply is adjusted daily, meaning that credit, loans, or the asset itself can be quickly acquired by those who need it. Likewise, when the economy turns, the supply can be reined in and mitigate a prolonged contraction cycle without holders of AMPL losing their network share.
The intent of Ampleforth is to retain the purchasing power of its users over time, to provide a decentralized stabilizing mechanism, and to consequently provide a digital transactional currency that can be used as collateral in contracts across the cryptosphere. To help make this possible, the Ampleforth team is already in the process of deploying cross-chain AMPL on NEAR, Acala (a Polkadot platform), and Tron.
Ampleforth can be the one DeFi token to rule them all.
So imagine, if you will...
- NEAR's interoperability with Ethereum and its smart contracts.
- Platforms like Balancer and Aave providing their services on NEAR, with its minuscule fees and one-second block times.
- Ampleforth's algorithmically-adjusted and cross-chain currency providing a stable base for contracts and collateral.
Imagine a truly decentralized financial ecosystem that's not weighed down by transaction fees, slowed down by congestion or illiquidity, or at risk of a stablecoin rug-pull.
Imagine a crypto-wide system of decentralized banking and finance with no need for lenders of last resort and no need for arbitrary intervention in the money supply.
Imagine a true digital transactional currency and collateral system with AMPL, complemented by the digital store of value system of Bitcoin.
The NEAR Protocol can tie different blockchain ecosystems together and bridge the most popular ERC20 tokens and projects to its own chain. (NEAR also has its own fungible and non-fungible token creation and standards.) Ampleforth can be the main collateral token used on a decentralized lending platform like Aave, with decentralized exchanges and AMPL liquidity pools offering a wide array of digital currencies used on those platforms. Explosive growth in such a DeFi environment could kick off or perpetuate a bull run for digital assets.
NEAR + Decentralized exchanges + Decentralized collateral platforms + Liquidity pools + Prediction markets + Ampleforth's rebase currency = The Future of DeFi
For those who may be asking, "What's in it for me?"
Keep in mind that, because of Ampleforth's rebase mechanism, in a prolonged expansion cycle (which is certainly possible), holders of AMPL could become the new upper-class of digital asset wealth. In short bursts of supply expansion last summer, buying AMPL at the right time could yield 20-40x your investment in just a matter of weeks or a couple of months. Many days or even weeks of 5-10% daily rebases could be possible in a DeFi super-cycle, which means your AMPL holdings could increase by those percentages, per day.
Even periods of extended 1-3% rebases with daily compounding can yield massive returns. Holders of a rebasing currency live for the economic expansion cycles.
We're currently in a rather large bull run and DeFi has yet to really find its strong footing in this market. There's a lot of hype and FOMO but not much practical application yet. Much of this is being curtailed by Ethereum's fees that act as a rather large barrier to entry for most users. Unlocking the potential on a chain like NEAR (which also has its own simplified staking interface) could open the flood gates to investors of many different tokens.
It's up to each of us to do our own research and find those assets with the most potential. It is my opinion that NEAR and AMPL are two of those assets that are primed for success.
The views and opinions expressed in this article are not intended to be financial or trading advice. Please do your own research before investing in any assets, as there may be substantial financial risk involved.
Full disclosure: I have long positions in both NEAR and AMPL.