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DeFi with Bitcoin Cash.

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Written by   288
1 month ago

What I think it will be possible to do with SmartBCH in a couple more months once more developers join the network.

SmartBCH will bring more utility to the Bitcoin BCH blockchain. In short, SmartBCH will add more features on top of layer one BCH. Smart Contracts will create many new tools and financial freedom for all. It will also add more value to Bitcoin Cash because many more people will be using the features, utilities, and tools that SmartBCH will bring once it is fully implemented in the mainnet.

In short, smartBCH means that what Ethereum does, Bitcoin Cash will do better, faster and cheaper. It will make it easy for developers to export their Dapps from Ethereum into Bitcoin Cash. It won't be a trade or a coin conversion, and it will be literality bringing that which has been already built on ETH into BCH. One of those things that I am waiting to see is decentralized finances.

Decentralized finances will mean borrowing and lending your assets using smart contracts. For example, I think you will be able to lend your BCH and get some interest paid in time cycles that could go from one day, week, month, and even an entire year or even years. Likewise, you will be able to borrow against your BCH for a particular time.

I think it will work like this: the lender will lock its assets and ask for an annual interest rate of 12%, as an example. Other lenders will choose a higher or lower rate, and the market will decide the pace. So a borrower will choose the best rate but will need to ensure that he will return the money borrowed. So the borrower will deposit 1 BCH and get 0.5, let's call it WBCH. And once the contract is mature will have to give back 0.5 WBCH plus the interest by a specific date. The borrower will lose his 1 BCH deposit if payment is not made. The other asset could be any other asset with value or stablecoins.

If the borrower defaults, the lender can take the deposit minus the fees and cost of the contract. The price will be fixed to 2 BCH for 1 WBCH, and the borrower will have the opportunity to go and sell that new asset or hold it or bet against other investments. The borrower will borrow because they think we can get either more BCH or more USD and that the profits will be enough to pay the loan back.

The borrower doubles his WBCH within the time set by the contract and pays only 12% interest payable in BCH only. That will mean that he now holds 0.26 WBCH, equal to 0.13 BCH. So by borrowing, the trader was able to make 1.13 BCH. An interest of 12% will mean that the loan probably goes for one year, and experienced traders could be able to make more than what the appeal was, and the lender won't have to worry because his loan is secured.

Once the smart contract is completed, the WBCH printed will be burned. It will likely only be a token value at half of the lent asset to guarantee the lender gets his lent assets back and that the borrower has the motivation to pay back his loan, a win-win situation.

The interest and terms will probably be much different than my example, but I think that a thing like that will be possible with smartBCH and DeFi running on the Bitcoin Cash network. Pretty much what I am saying is that the smart contracts will become more complex to allow this sort of transaction, and you will also need to have a DeFi Dex, which in this case, will be something like Uniswap on eth but maybe with a different name for the Bitcoin BCH network.

My example is what is already happening in other DeFi sidechains like Sovryn, a Bitcoin sidechain on RootStock RSK. I am sure that SmartBCH will bring all of the features other chains provide. Trade on the spot, limit orders, margin limit orders, lend, borrow, stake, and many other goodies from DeFi.

But I also think that eventually, assets from the real world like house loans and car loans will move into DeFi, and Bitcoin Cash, with its low fees, has a great chance to serve a broader audience, in my opinion.

If you have a better opinion, please, drop your comment in the section below. I would like to hear your views. It is just my imagination, so that the result could be different from reality. We will soon find out once smartBCH is out on the mainnet, and we can start playing with decentralized exchanges and decentralized finances.

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Written by   288
1 month ago
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