Blockchain innovation introduces unlimited potential, opening the doors to decentralised forms of data. Decentralised finance or DeFi is a great example of this potential and the power within smart contracts. DeFi has the potential to revolutionise traditional finance by creating a more open and accessible financial ecosystem.
DeFi offers a new paradigm shift in finance, allowing more fluid forms of money in a transparent and scalable fashion. In just a few years, DeFi has gained a lot of attention, becoming a multi-billion dollar economy.
However, DeFi poses many challenges when it comes to security, costs, scalability and regulatory compliance. Let us dive deeper into some of the challenges and solutions in this article.
Challenges and Solutions
The first issue with DeFi is high-unpredictable transaction costs. Users often faced exorbitant fees when interacting with decentralised applications (dApps) on a blockchain. This created significant challenges for DeFi adoption. Additionally, the unpredictable nature of transaction fees made it difficult for users to accurately estimate the costs involved, leading to frustration and hindering user experience.
How Concordium lowers transaction costs
Transaction fees on Concordium are stable in Euros, meaning that the price in CCD will fluctuate based on the CCD to EUR exchange rate and each transaction has a clearly-defined fee, which varies based on the type of transaction. A transaction fee is calculated based on the size of the smart contract and its parameters. For starters, a simple CCD transfer is fixed at 1 Euro cent.
With this unique mechanism, businesses and individuals pay much lower transaction fees and be able to predict their costs.
Blockchain technology has, in some instances, been viewed as a place used by criminals and scammers. Bad actors look to take advantage of the rapid growth and popularity of DeFi, exploiting vulnerabilities in the system to carry out various fraudulent activities.
The criminal activities include hacking, phishing, rug pulls, money laundering and scams. This limits the technology’s potential for mass adoption especially for commercial purposes.
How Concordium offers protection
Concordium is here to achieve a new level of trust and security. By leveraging the power of ID technology and advanced zero knowledge proof techniques, Concordium provides a platform that prioritises privacy, and self sovereign-id.
Through its innovative features, Concordium offers privacy-enhancing features that allow users to protect their identities.
Blockchain scalability is the ability for a blockchain network to handle an increasing number of transactions without slowing down or compromising its performance. This is a fundamental challenge facing several blockchain networks, especially those with high transaction volumes like Bitcoin and smart-contract platforms.
How Concordium tackles scalability issues
Concordium’s blockchain is designed to solve scalability problems by implementing a unique architecture that ensures high throughput and efficiency. Concordium is implementing ConcordiumBFT, our new HotStuff based consensus protocol to be rolled out in 2023.
With the ConcordiumBFT implementation, the Concordium blockchain remains at the forefront of blockchain performance as it is efficiently balancing speed, capacity and security to the benefit of the many use cases relying on the Concordium infrastructure to support their goals.
When combined with the upcoming Web3 ID upgrade of Concordium’s already market leading approach to self-sovereign identity, based on verifiable credentials, a significant business potential is unlocked for the entire Concordium community.
This list of issues is non-exhaustive and we will continue to contribute science-based solutions while educating the DeFi community as a whole. As the only L1 blockchain that offers a built-in self-sovereign identity feature wherein every user’s real world identity is authenticated without compromising their privacy. The Concordium blockchain is designed to be fast, secure and cost-effective.