Despite all of the rumors about cryptocurrencies and their future, hundreds of billions of dollars continue to circulate in the DeFi world. It’s no surprise that companies are scrambling to set up DeFi exchanges and get a piece of the booming crypto market.
In this blog, we’ll go over all of the nuances of DeFi development that business owners often overlook, as well as concrete advice on how to successfully launch a DeFi exchange on Terra Blockchain.
First and primarily! Let’s take a closer look at Terra Blockchain.
Terra was established in January 2018 with the goal of developing a decentralized money transfer system based on stable coins. It has grown in popularity as one of crypto’s most popular Layer 1 networks, providing compatibility with both the traditional fiat economy and the larger crypto ecosystem since its inception.
Its success is bolstered by the growing use of its main product, the US dollar-pegged stable coin UST. It is now the fifth-largest stable coin on the market and is widely regarded as one of the most decentralized dollar-pegged cryptocurrencies. In the last two years, Terra’s DeFi programs have seen an increase in usage.
Terra is built using the Cosmos SDK framework, which means it is not yet compatible with the Ethereum Virtual Machine.
Nonetheless, Terra has been upgraded to Stargate with the latest Columbus-5 update, which means it is now compatible with some of the most important crypto ecosystems, including Solana, Polkadot, and Cosmos. Terra will be connected to Ethereum and most other cryptocurrencies via the Gravity Bridge, making it simple to move Terra assets between ecosystems.
Terra’s ecosystem is small in comparison to other Layer 1 networks such as Ethereum, Binance Smart Chain, and Solana, with a current market cap of just over $8 billion. However, it does include a new set of DeFi applications.
The functionality of the Terra DeFi platform
Terra’s goal is to promote transactions and create a massive payment ecosystem that brings together banks, credit networks, and payment gateways into one open system. Terra’s ability to enable accelerated transactions is one of the reasons businesses have begun to consider it for DeFi development.
Stable coins, Terra believes, are crucial to completing this mission because they can do two things:
- Keep your purchasing power
- Allow for easy, low-cost payment options
Bitcoin’s purchasing power means different things to different people and economies because it is a global currency.
For some, the US dollar is too volatile, but for others, it is a safe haven. Because of this, the current dominance of stable coins such as USDT and USDC is problematic. Terra devised a method for issuing regional stable coins that are also easily traded as a result.
Terra DApps are frequently created by developers seeking funding from the Terra Fund. Developers join the fund by submitting their DApp website, specifying where their funds will be spent, explaining the in-DApp regulations, and documenting any potential DApp audit data.
Validators vote on whether or not the DApp can pull funds and the level of investment after developers apply to the Terra Treasury. Terra gives money to DApps based on their weight or relevance to the larger network, with the amount varying from case to case. The more convincing a DApp is, the more likely it is to get funded.
Validators can also vote to ban a DApp if it misappropriates treasury funds, effectively barring it from receiving any further funding. A DApp, on the other hand, can earn more money based on two factors: strong economic performance and efficient fund management.
What are the Benefits of Using Terra Blockchain for DeFi Development?
Terra was created to be a user-friendly, global electronic currency platform. It was initially popular among South Korean e-commerce platforms because it had lower transaction costs than most credit card and payment processor providers.
Transactions are subject to a processing fee, which is typically less than 1% of the total transaction amount, and is paid to validators as a reward. Terra stable coins can be used to make quick payments, and retailers can accept them as a payment method to save money. Terra can now be used for a variety of things, such as transactions, financing, renting, and insurance, as well as contributing to Social Activities.
Terra’s Blockchain Benefits
The Terra blockchain is ideal for Defi smart Development because it has three key advantages: speed, lower charges, and compatibility.
• Charges and turnaround time
Using the Cosmos Tendermint consensus method, Terra can achieve high transaction per second (TPS) while maintaining low fees. It is expected to handle up to 10,000 TPS, with many of the chain’s traders costing less than a dollar.
Ethereum, on the other hand, has a TPS of 15 and transactions cost $9. Terra’s total number of trades is roughly half that of Ethereum’s total number of works, whereas gas fees are 0.25 percent to 0.65 percent of Eth’s total.
• The ability to work together
Being a part of the larger Cosmos ecosystem allows Terra projects to interact with other Cosmos initiatives via the Cosmos Inter-Blockchain Communication protocol (IBC). Terra now has native support for popular protocols like Osmosis, Juno, Secret Network, and Sifchain.
Terra will be able to connect to each protocol in the Cosmos environment as interoperability improves in the future. Outside of the Cosmos Ecosystem, Terra features a bridge that connects it to Ethereum, Harmony, and Solana.
Terra’s economy is rapidly expanding, with over a hundred projects expected to be operational by 2022. The term TeFi was coined as a result of the strong emphasis on DeFi applications (Terra Finance). UST’s market capitalization is $14 billion, and it has recently increased by 25%.
Unlike EVM-compliant networks, which encourage current ETH protocols to be included on their distributed ledgers, most Terra protocols are built from the ground up. The sheer number of Terra native businesses in development, as well as their potential to attract large sums of money at this early stage, is impressive.
Terra’s main goal is to allow users to connect with decentralized apps (DApps) without having to deal with the volatility and high gas fees that Ethereum does.
As a business venture, DeFi exchanges are critical, and Terra-based Defi exchanges can be an exciting opportunity for anyone looking to break into the DeFi space.
We can assist you in setting up a DeFi exchange on the Terra blockchain. We provide strategically aligned services to help businesses tap into the evolving Terra market and gain a competitive advantage.