Top Reasons to Build DeFi dApps on Concordium
Building DeFi projects on Concordium brings more than a private and secure environment.
The Concordium Identity Layer changes the way DeFi projects can be organized, enabling the classification of participants in a way that brings trust and accelerates adoption.
The Concordium ecosystem features basic building blocks for DeFi, such as wrapped CCD tokens, NFT marketplaces, an Ethereum token bridge, and a decentralized exchange (Concordex). This article was compiled together with our team of scientists and examines the top reasons to build DeFi dApps on Concordium.
What are the benefits of building on Concordium?
Sponsored Transactions
Sponsored transactions refer to a mechanism where a third party covers the transaction fees on behalf of the user. This feature is attractive for DeFi solutions as it allows users to interact with the blockchain without needing to hold or spend cryptocurrency to pay transaction fees.
By enabling sponsored transactions, Concordium reduces barriers to entry for users and enhances accessibility to DeFi applications, thereby encouraging wider adoption.
A great example of sponsored transactions are already available on Concordium and is used, for example on mysome.id. Learn more about mysome.id in the video below and verify yourself on Social Media now.
Verifiable Credentials
Verifiable credentials provide a secure and decentralized way to prove and authenticate information about individuals or entities. In the context of DeFi solutions or dApps, verifiable credentials enable trustless and efficient identity verification processes.
Users can securely share their credentials and selectively reveal only the relevant information without giving away sensitive personal data, which enhances privacy and reduces the risk of identity theft or fraud. The Concordium blockchain's integration of verifiable credentials facilitates the development of decentralized identity solutions, which are crucial for ensuring compliance and regulatory requirements in the DeFi space.
The Concordium chain currently has the “ID 2.0” credentials implemented, which allows users to prove information about the data in their passports. With the upcoming Web3 ID, Concordium will open up to arbitrary ID providers to issue credentials such as club memberships, loyalty program status, university degrees etc.
This will be a game-changer in the field, as the only chain ensuring that all accounts have a verified ID based on a government ID. It means that it sets Concordium apart from other L1s, making it compliance-ready.
Fast Finality
Fast finality refers to the ability of a blockchain to quickly confirm and settle transactions, reducing the time required for transaction validation. This feature is essential for DeFi solutions as it enables faster transaction processing, improving the overall user experience.
With fast finality, users can execute trades, provide liquidity, or participate in other DeFi activities with reduced latency, mitigating issues such as slippage. The Concordium blockchain's fast finality feature ensures that DeFi applications built on it can achieve high responsiveness.
Currently, Concordium has around 11 seconds of average time to finalize a transaction. However, this will be substantially reduced with the upcoming consensus update, ConcordiumBFT, when the chain is not under high load.
Shielded Transactions
Shielded transactions, also known as privacy-preserving transactions, provide enhanced privacy and confidentiality for users. When conducting transactions on the Concordium blockchain, shielded transactions protect the transferred amount from public visibility.
This feature is particularly attractive for DeFi solutions as it helps address concerns around financial privacy and confidentiality, enabling users to engage in DeFi activities without exposing their financial information to the public. Shielded transactions enhance security, protect user data, and foster trust in the DeFi ecosystem.
Concordium is also investing in research towards further improving the privacy of users by allowing you to additionally hide the sender and receiver of a transfer.
High transaction throughput
Concordium’s efficient consensus mechanism and smart contract execution engine allow for a high transaction throughput in terms of transactions per second. This prevents congestion and allows many users to engage with the system simultaneously.
Low and stable transaction fees
Concordium is uniquely designed to make trading fees predictable and low. Transaction fees are fixed in Euro terms and low.
Modern smart-contract language
Our smart contracts are written in Rust which allows developers to easily write and verify reliable and safe smart contracts.
Science-based and secure platform
Concordium’s protocols are based on solid science and designed with safety in mind. The Concordium Blockchain Research Centre Aarhus (COBRA) is a Research Center at Aarhus University.
The driving goal of the research center is to provide the basic research needed to build energy-efficient and scalable blockchain technology that is provably secure. Along the way, we expect a lot of discoveries in the blockchain space and related sciences that we cannot anticipate at the onset.
Conclusion
Overall, sponsored transactions, verifiable credentials, fast finality, and shielded transactions are attractive features for DeFi solutions or dApps built on the Concordium blockchain. They improve accessibility, privacy, efficiency, and security, ultimately contributing to a more robust and user-friendly decentralized finance ecosystem.