We are rapidly moving closer to the time when Hive will finally have a decentralized Smart Contract platform. This is going to really change the opportunities for the blockchain when it comes to DeFi.
This is something that was bantered about over the last few months. It is also one of the gamer changers for Hive that I listed for 2021. Getting this capability, even at the second layer, adds a great deal more flexibility to the blockchain.
Obviously Smart Contract can provide near unlimited opportunities for developers and entrepreneurs. They are not only financial but can serve other things. For this article, we will simply focus upon the financial aspects.
There is no doubt that DeFi is getting bigger. We are seeing a great deal more activity taking place.
Here is the present chart of the money locked up in DeFi. As we can see, the recent downturn in pricing of Ethereum hurt the numbers.
It is easy to see this is a realm which attracts a lot of money. Even the wLEO liquidity pool got up to near $1.1 million before the pullback.
Obviously, most of these numbers reside on the Ethereum blockchain. However, with Smart Contract capability, suddenly a lot of the projects on there can be replicated on Hive. Being decentralized will enable it to have the security and confidence of the using public.
Leofinance is one team (there might be more) who are looking in this direction. Here is a Tweet that was sent out providing a few details.
This project is focused upon its own token for obvious reasons. However, since the software is open source, it can be able to be replicated by other teams.
As for what this provides, once again looking at the DeFi aspect of things, we see this from their latest posts.
With LeoFi on the horizon, it's not hard to imagine collaterlized assets, lending, delegation leases and even synthetic assets arriving to the LeoFinance platform (and LEO token economy) within the first half of 2021.
This is a healthy list of options that look like they will be available within the next 6 months. Anyone who took a peak at what is taking place on Ethereum with DeFi will notice that names such as Maker, Compound, and Dai all apply to these areas.
Also, the swap feature is similar to Uniswap which allows for ERC20 tokens swapped for each other. We could see something similar on Hive with this sidechain.
Then we get a few more details.
To wrap this all up with a neat bow, we're launching a decentralized node network on top of the Hive blockchain. This will allow anyone to spin up a simple node that will verify sidechain blocks for the LEO token. The testnet for our new token will be out very soon (weeks, not months) and we will begin open stress testing. After we're comfortable with the testnet development, we'll deprecate the LEO token on Hive-Engine/scotbot and migrate our operations to our own second layer that is truly decentralized, robust and extremely fast.
The bold is my addition to highlight the decentralization of this chain. Anyone will be able to put up a node for block production. We will have to wait for the details but there will likely be some type of payout (return) for providing this service to the chain.
How Does This Help Hive?
To start, this is first of what I expect to be many platforms of this nature. Just like there are many UIs on Hive, including the Tribes who mostly have a clone of Steemit.com, this provides each community with another option. While it might not be for every development team, there are ones that will certainly pick up the mantle and run with it.
We got news of @threespeak's project which requires decentralized Smart Contract capability. Will they hop on what Leofinance is doing or create their own? In the end, from Hive's perspective, it really does not matter. That is more activity that is being added at the second layer.
As many of us keep harping upon, activity is the key. With more taking place, that requires more resources to interact. This Smart Contract design requires each node to have HP to operate. Naturally, the more active a node is, more HP is needed to facilitate the transactions. All transactions are recorded on Hive (I presume as a custom JSON) necessitating the Resource Credits to operate.
How much will be required per node on average is still a mystery. Nevertheless, try to envision thousands of different nodes operating, relating to many different projects. Some will have few transactions while others have an overwhelming amount.
In short, this provides another sink for the Hive token.
But let us not forget the Resource Credits. Not only will node operators need them for the transactions, but also the individual initiating the transaction. Like anything, to operate on Hive requires at least a minimal amount of Resource Credits.
Here is where things get very interesting, at least from the DeFi perspective. One of the major advantages that Hive has is no direct cost on transactions. As long as there are enough Resource Credits, there are zero fees associated with the transactions. This is not the case on Ethereum. Just recently, people were paying more than $50 on a single transaction. We know this excludes a large number of transactions. After all, who would logically pay $50 to send $75. That makes little sense.
On Hive, that is not a problem since the cost would be zero.
Hence, we can look at this as a subscription model; for $50, one can get, at present pricing, 416 HP. That is more than enough for most to transaction daily without a fear of running out of RCs. Stated another way, for the cost of one transaction on Ethereum during peak times will virtually give one a lifetime of transactions on Hive.
Hive As Ethereum's Little Brother?
Just looking at the numbers, it is obvious that Ethereum is for the big players. As stated, one is not going to make a transaction of a few hundred dollars with those fees. Even if they drop into the $10-$20 range, that is still 10% on a couple hundred. That is steep.
Hive has the opportunity to target smaller users who are looking to be involved in DeFi. Microtransactions can add up to a lot. Imagine having Liquidity Pools that will allow people joining with any amount of money. Again, on Ethereum, a certain threshold has to be hit before it becomes economically viable to participate.
Many in the world do not have thousands to put into something like that.
In my view, with developments such as this, we are starting to move towards being able to replicate a lot of what some of the larger chains can do. This is likely to provide Hive with a large boost in overall usage. In the DeFi world, it only takes a few projects getting a bit of attention to get the ball rolling.
Couple this with 3Speak's idea of the SIP, drawing even more Hive into a Smart Contract while locking it away, and we can see how there is suddenly a move of keeping Hive within the system as opposed to it moving onto exchanges.
We will see what information comes out in the next few weeks but this is exciting news.
2021 might just be the year Hive makes a statement that the crypto world does not ignore.
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