Recently, the DeFi sphere, consisting of open source projects, designed to make the world of finance more clear and free with the help of blockchain and smart contracts, is rapidly gaining popularity. However, most DeFi applications are based on the Ethereum blockchain.

Recently, the RSK project, together with the MoneyOnChain, announced the launch of DeFi application which is based on the Bitcoin blockchain. The launch was implemented after 11 months of development and testing solution on the RSK network. The solution provides several use cases, including credit and trade, using the first cryptocurrency.

Together with @moneyonchainok, we have built #DeFi on @Bitcoin, making financial inclusion a reality! Are you keeping up with the Bitcoin evolution? Check out the details 👀https://t.co/bGqOrluBJh — RSK (@RSKsmart) December 27, 2019

Note, that the platform is decentralized and protected by Bitcoin miners. Thus, the pledged funds are not stored in the bank account, and all operations are carried out decentralized through smart contracts that work in the RSK network.

The RSK platform, which allows you to create smart contracts, helps MoneyonChain achieve its desired goal by using the Bitcoin blockchain.

DeFi And Crypto Loans

One of the latest trends in the crypto industry is decentralized financial instruments or DeFi. This term combines the services similar to classic financial instruments implemented in blockchains. Most often, DeFi services are based on the Ethereum blockchain. These include the issue of cryptocurrencies, the launch of exchanges, account management, transfers, and lending.

DeFi services declare the profiting characteristic of the cryptocurrency industry such as decentralization, anonymity, security, lack of influence of regulators, accessibility. On the other hand, the traditional prototypes – banking services – work on contrary principles. This is the possession of extensive information about the client, trust in a particular financial institution and strict regulation by national central banks.

“Classic” tokens like BTC, ETH, and many others are subject to high volatility. For use in calculations, it is often proposed to use stablecoins – cryptocurrencies whose value is stable. For example, DAI and USDC tokens, with which the most popular protocols Maker and Compound work, always cost about $ 1.00.

Source: Messari.com

The emergence of stable cryptocurrencies contributed to the development of crypto loans. The most popular services (by the volume of blocked cryptocurrencies in their smart contracts in terms of USD) are now Maker and Compound. They are based on classic banking mechanisms: raising funds from network users in the form of interest-bearing deposits and issuing loans against collateral.

Unlike traditional banks, which can issue unsecured consumer loans, DeFi services grants loans only against excess collateral. Stablecoins are used as loan currency and ETH as collateral.