It’s no secret that decentralized finance (DeFi) has exploded in recent years, with a wide range of applications offering pooled lending models, synthetic assets, margin trading tools, and exchange protocols. These solutions, while useful, prove redundant and clumsy when considered within the experience of the end-user who needs to utilize multiple applications. With overlapping functionality and limited usage, the current landscape for DeFi remains heavily fragmented.
DeFi reached this fragmented state through a large number of dedicated applications that, while functioning well for their purpose, causes users to jump back and forth between other applications for separate functions. With nearly $40 billion USD in value locked up in DeFi, there is a need for a better solution to further improve the state of DeFi.
Inevitable Aggregation of DeFi Applications
Naturally, the problem of scattered applications would be solved by aggregation which has aided in solving the frustration many users face on a regular basis. This however did not offer a solution to a large number of applications as most applications were only compatible with the Ethereum network. The aggregation of DApps was a step in the right direction as the world would patiently wait until a better solution would emerge.
Adding to the frustration of many was the fact that blockchains had yet to gain the ability to exchange information with one another. As more and more blockchains were created and used on a regular basis they became isolated chains of information, adding difficulty to those attempting to aggregate information from multiple chains.
The breakthrough of cross-chain message passing (XCMP) allows for a solution not possible only months prior and opens up brand new avenues for data aggregation. Multiple insights that were previously limited by the timing of data collection across multiple chains can now process and aggregate data without loss of time between.
The Polkadot network takes this scenario to the next level by allowing users to create fully customizable blockchains, known as parachains, that can collect and aggregate data from multiple third-party sources. These chains can then be used as sources of information themselves for other parachains to utilize.
The New Internet
A peer-to-peer network of parachains united under a single relay chain on the Polkadot network not only provides a unified security mechanism for all parachains to use but allows for secure and verifiable data to become exchanged like never before.
This new era of information is promising for the industry as a whole and will no doubt have a massive impact on the world's financial sector.