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DECENTRALIZED FINANCE ECOSYSTEM

Introduction
The global information infrastructure has been changed forever by the internet. Blockchain creating the new world financial infrastructure adds both existing markets and completely new ones directions. Defi offer users a chance to a variety of financial services like investing, lending, trading on stock markets and more. We do all these without the need to trust centralized financial institutions and companies. Blockchain technology provides everyone 24 hours of financial services without restrictions such as the Ethereum platform. Defi made process of participation easier, lower possibility of censorship, lower cost, etc

Decentralized finance(Defi)

The process is operated through automated apps that are developed on blockchain platforms.it create a financial system where any person can feel comfortable and participate. With Defi, you don’t need to worry about rules.

HISTORY OF DEFI

Decentralized Finance is the full meaning of Defi. It’s was created in 2018
Maybe or maybe not Bitcoin was classified as Defi. It was the key enabler for cryptocurrency industry for i which decentralized finance is part.

Key advantages of a decentralized financial system

• Accessibility: an advantage is the accessibility for any user regardless of the person location, credit history and restrictions that exist in a centralized financial system

• Transparency: in blockchain there is transparency of all transactions. Smart contracts can be easily audited and identified for possible vulnerabilities

• Flexibility: software interface is flexibly thus users can use any preferred interface offered by third-party developers.

• Permissionless: this let uses to directly interact with apps through browser extensions. It also makes it possible to create their own apps

DEFI ECOSYSTEM

• Tokenization
• Lending
• payments
• Prediction Market
• stable coins
• Wallets and assets management
• dentity
• Decentralized exchange and market places

PREDICTION MARKETS

A prediction market is a market that makes it possible for people to bet on future events. These events include sales of a company, elections, price fluctuations of commodities, even changes in the weather and just about any outcome that can be objectively verified after it happens.

Prediction markets have been in existence for decades, but with blockchain-related inventions (decentralized governance models, smart contracts, etc.) leveraging the idea, a new level of excitement about prediction markets has been reached.

The protocol that give users the opportunity to create prediction markets is Augur. These provide a platform for investors to predict the outcome of future events. These markets combine the predictions of contestants and motivate them to contribute more knowledge by awarding those who are finally proven right.

There are four stage processes in which the market follow;

• Creation
• Trading
• Reporting
• Settlement

Creation

Anyone can create a market for a future event. The creator sets event end times and assigned the reporter that will give back about the results about the event.
The steps are as follows;

1. Choose if to create a binary (yes/no) or scalar marker (range of values).
2. Create a draft market.
3. Make sure to make your rules clear regarding scenarios that will determine the outcome.
4. share the market, while it is still in draft form, that is to generate interest in it before it’s activation.
5. Activate the market. This calls for making a deposit in ETH and in REP, but Veil can automatically exchange the previous for the current using Uniswap for convenience.
6. Report the outcome of the market once the event has concluded.

Trading

When users place a bet for a possible outcome of a market, they basically predict ETH on one outcome or the other.
Augur’s matching engine provides a full set of shares that consists of one share of each possible results of the events.

Reporting

After a person makes a bet on an event in the market created, the results of the event decided as the market preparing for settlement to begin in the next stage.

Settlement process

When traders are leaving they do so by either selling their shares to others or be with with the market.

Conclusion

Defi is in the crypto ecosystem which a lot of benefits. It has removed middlemen from transactions means doesnt need any third party. Augur is one of the protocol in the prediction market ecosystem.

Defi offer users a chance to a variety of financial services preventing discrimination and censorship. Lending, borrowing, etc, We do all these without the need to trust centralized financial institutions and companies.

Professor @gbenga, here is my homework task submission for week 7.

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