In May of this year Kolibri DAO was announced and in July Kolibri DAO went live. From that moment on, Kolibri DAO was truly decentralized and only the community has control over the protocol.
One of the most important qualities of a blockchain is decentralization. In a decentralized network, no entity but you can access your address, reverse transactions, change protocol rules and settings, activate accounts, etc.
A decentralized network is immutable and trustless. You don’t need to trust a third party and you can independently manage your own tokens. In a centralized network, an entity can change the rules of the game or worse.
A blockchain in its basic form only allows basic transactions. Allice transfers 10 tokens to Bob. But if you want to add more complex rules and transactions, you need to be able to deploy applications on the blockchain.
This can be done by deploying smart contracts on a blockchain. However, not all channels support smart contracts. And not all channels that support smart contracts are truly decentralized. Can you imagine Decentralized Finance (DeFi) on a centralized blockchain? There is nothing like it.
Tezos is a fully decentralized blockchain, where even protocol upgrades can only be activated after a chain voting process in which every token holder can participate. Additionally, Tezos is a decentralized smart contract platform that allows developers to write smart contracts in several different smart contract languages ââand deploy dApps.
The activity of developers and users on Tezos has grown exponentially. The number of monthly deployments of new contracts on the main network increased from 784 in March to 4,269 in August. And just in mid-September, that number almost matched. If we look at user interaction with smart contracts on the mainnet (contract calls), we see 0.5 million contract calls in March and 3.4 million contract calls in August. Currently in mid-September, we have already crossed 3.7 million contractual calls.
This shows tremendous growth within the Tezos ecosystem. On several occasions, Tezos’ total daily trades (i.e. core trades + smart contract interactions) hit 0.6 million trades per day, which compares to 50% of Ethereum’s daily volume. Growth is proving to be sustainable every month, for over 12 months now.
The dApps (decentralized applications) are the next part of the evolution. It is about eliminating the middleman. A basic decentralized blockchain allows you to cut out the middleman while ensuring that your transaction gets to its destination. Now you no longer need a bank to manage your account and allow you to transfer value. DApps can eliminate middlemen in more complex use cases. For example, if you want to take out a loan. Here, DeFi comes into the picture.
Decentralized finance is simply the deployment of financial products on a decentralized system. If you want to deploy these products on blockchain, you need to create a smart contract in which a complex number of rules and parameters are embedded.
As a result, a user can interact with an application on the blockchain that allows them to take out a loan in the form of stablecoin while providing collateral in the form of XTZ.
A small, but important, detail needs to be covered, however. Although the application is deployed on a decentralized blockchain, it is not a decentralized application so the developers of that specific application can still modify the underlying smart contracts. It is only after the backdoor to changing the code is closed for good, that an application is truly untrustworthy. After all, if you lock value in a smart contract and developers can always change the rules of the game, then you will have to trust the developers with all that value.
You might be wondering why developers wouldn’t just let go of app control if they are developing a decentralized app. Well, it is necessary to be able to change the settings and be able to fix any bugs if necessary. If we take a look at lending platforms and stablecoins, there are stability fees, a debt cap, liquidation thresholds, and other parameters that can be used to fine tune values ââand manage the system.
Decisions have to be made and somehow these changes have to be implemented. Who else can perform these tasks? The decentralized solution is to deploy a DAO that democratizes this process. Governance tokens are distributed and token holders can vote on the proposals. Once a proposal is accepted by the majority of token holders, the proposal is automatically deployed. Sounds familiar? Yes, Tezos protocol updates are deployed exactly in a decentralized manner.
Although DeFi is a household name, real DeFi is not as common as you might think. Many DeFi are deployed on centralized channels. And many DeFi projects are still in the process of fully deploying their DAO. The Tezos DeFi ecosystem is growing and maturing rapidly. I think we can expect a lot of DeFi projects to activate their DAOs in the coming year.
The first fully decentralized DeFi application on Tezos is Kolibri. Kolibri (kUSD) is a Tezos-based algorithmic stablecoin that is backed by XTZ with a minimum dollar value ratio of 2: 1. You can mint your own kUSD on kolibri.finance, in the form of a decentralized loan, which means you will provide your own collateral and lock in an amount of XTZ in a smart contract and get kUSD back. At the time of writing, 3.7 million XTZ, worth 22.8 million USD, is locked in Kolibri’s coffers as collateral, and a total of 4.4 million USD is issued. and in circulation.
In May of this year Kolibri DAO announced and in July Kolibri DAO went live. From that moment on, Kolibri DAO was truly decentralized and only the community has control over the protocol. In September, the first proposal was accepted and implemented. Currently, a second proposal can be voted on to lower the stability fee. You can find out more about this proposal here.