The fintech community has often viewed innovation and regulation as opposing forces, and cryptocurrency is no different. In 2019, as US exchanges started delisting tokens amid regulatory uncertainty, crypto firm Circle published a blog post in which it accused US regulators of “chilling” innovation.
However, the US government isn’t the only one to leave blockchain entrepreneurs hanging. In India, the cryptocurrency scene was effectively put on hold indefinitely in 2018 when the Reserve Bank of India issued a ban on digital assets. Cryptocurrency trading was confined to peer-to-peer sites, and many Indian crypto entrepreneurs ended up taking their ideas abroad.
However, in March 2020, the Supreme Court of India overturned the ban, opening the floodgates for the cryptocurrency markets to a population of 1.3 billion people. As the crypto markets soared to new all-time highs earlier this year, daily trading volumes on India’s biggest crypto exchange surpassed $2 billion, up from $500 million two months prior.
Now, India is becoming a veritable hub for blockchain and DeFi, with entrepreneurs stepping forward to put their ideas into practice.
Laying the Groundwork
Even before the ban was lifted, there were signs that development had been happening on the infrastructural level. In early 2019, Matic Network emerged as one of the select few projects to have its token sale hosted on the Binance Launchpad IEO platform and also gained early backing from Coinbase Ventures. The platform, a layer two scaling solution for ETH, had been founded by three developers in Mumbai. Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun convened around the idea of using the Plasma scaling technology to create a more user-friendly blockchain platform. Now, Matic, rebranded to Polygon, has one of the fastest-growing application ecosystems and platform tokens in the space.
In particular, Polygon is now hosting its own suite of DeFi applications, attracting users looking to escape ETH’s transaction fees, which have become prohibitively high at an average above $20. However, as the platform is ETH-compatible, building on Polygon means users can continue to interact with the ETH ecosystem of apps.
Furthermore, while the platform is proving attractive to migratory ETH apps, such as Aave and 1inch, it’s also pulling in Indian DeFi innovators.
Layer 2 DEXs
Uniswap demonstrated that the DEX is among the most vital organs of any DeFi ecosystem. There needs to be an engine for liquidity and the incentives to provide it as the foundational layer for DeFi to exist.
As such, QuickSwap is the Uniswap of Polygon. It’s founded by Indian engineer Sameep Singhania, who has worked on DeFi projects including Bonded Finance and ParaSwap.
QuickSwap is a fork of ETH’s Uniswap decentralized exchange; therefore, it offers many comparable benefits to users, including the opportunity to earn yields. The project is currently incentivizing liquidity providers to migrate their stakes from ETH protocols with high APYs of over 300% for some token pairs. The approach appears to be working as the exchange surpassed the $1 billion value locked milestone.
Developed by Indian entrepreneurs Ramani Ramachandran and Priyeshu Garg, DFYN is a decentralized exchange (DEX) and automated market maker (AMM) deployed on Polygon. The DEX has quickly become a quick story as it buzzes to $200m TVL in different liquidity pools.
In addition to cross-chain swaps, the platform offers liquidity pools where token holders can deposit DFYN tokens in return for yield. The rewards are as much as a 0.3% fee on all trades proportional to liquidity providers’ shares in a specific pool. Unlike its most counterparts, DFYN is a gasless exchange, meaning users only have to sign the transactions and no fee is passed on to them.
Developed by an industry veteran, Tarun Jaswani, Unbound is a liquidity protocol built on top of existing AMM protocols using Liquidity Provider Tokens (LPTs) as collateral. In simpler terms, Unbound Finance’s protocol leverages the unused liquidity of AMM Liquidity providers to offer interest-free loans in the form of its native token UND or other supported synthetic assets.
Instead of a liquidation engine, Unbound uses a special combination of collateral ratio, risk management via specific stablecoin ERC-20 LPT pairs in addition to its DeFi treasury.
DeFi also offers tremendous potential for the Indian user base, but not in its current format. As things stand, DeFi has several significant barriers to entry, including the requirement to over-collateralized loans, for example. These barriers prevent DeFi from becoming accessible to those who would need open, borderless finance the most, hampering investment in real-world enterprises and opportunities.
EasyFi was founded by an India-based entrepreneur Ankitt Gaur, who started the project with a view to connecting DeFi to the masses. It’s a lending platform built on Polygon, offering micro-lending, under-collateralized loans, credit delegation, and credit default swaps. It uses a reputation-based system to offset lender risk and offers cross-chain bridge contracts allowing the seamless transfer of assets across platforms in a non-custodial manner.
Perhaps most importantly, it aims to make onboarding ultra-simple – a feature that’s still missing all too often in the cryptocurrency world.
The Elusive Enterprise Adoption?
Enterprise adoption on any grand scale has been an elusive aspiration for many blockchain entrepreneurs. The idea that decentralized finance and the institutions and corporations could ultimately come together would have seemed crazy as little as a year ago. But interest in crypto and blockchain is now inspiring innovators to come up with use cases connecting DeFi to the real world.
Trace Network is an enterprise-grade DeFi protocol that also leverages the properties of NFTs to create a multi-layered solution for the luxury goods industry. NFTs are assigned to individual items acting as a certificate of authenticity and traceability. Furthermore, merchants can tap into Trace Network’s trustless decentralized financing solutions.
Lokesh Rao, a founder of Trace Network, has over 12 years of experience in enterprise technology. He’s been actively involved in enterprise DLT and blockchain solutions since 2017, including in the luxury, lifestyle and fashion segments.
India’s progress when it comes to DeFi innovation shouldn’t really be surprising. Within two years, the nation is on track to overtake the US in terms of the number of software developers, indicating that it’s only just beginning to mark its digital footprint on the world. Regulation permitting, if current trends continue, India will become the leading global contender for blockchain innovation over the coming years.
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