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In the fast-evolving world of financial technology, only a few things have caught the world’s attention like the evolution of Decentralized Finance, popularly known as DeFi. Unlike traditional financial systems which rely on intermediaries like brokers and banks, DeFi leverages blockchain technology to create a trustless and borderless system of financial services and products. While DeFi proffers numerous solutions to some underlying challenges in the traditional financial system, its development on different chains in the past had led to the sudden disappearance of funds, largely due to technical challenges overlooked while developing those chains. In this article, we shall be looking into the technical advantages of building DeFi on the Aptos blockchain, utilizing the Move Language which emphasizes safety and flexibility.
What is DeFi?
Decentralized Finance (DeFi) leverages distributed ledger technologies (DLT) to provide services like trading, lending, and investing, all while bypassing the need for conventional centralized intermediaries. According to Forbes Magazine, DeFi aims to democratize finance by replacing legacy, centralized institutions with peer-to-peer relationships that can provide a full spectrum of financial services, from everyday banking, loans and mortgages, to complicated contractual relationships and asset trading.
Meet Aptos Blockchain
Prominent for its speed and security, Aptos is a Move-based Layer 1 blockchain and smart contract platform which uses Proof-of-Stake for its consensus algorithm. Grappled with intricate obstacles that hinder universal acceptance, L1s like Ethereum and Solana have to choose between any (but not all of) scalability, security and decentralization. Interestingly, Aptos excels in all three.
Why Aptos and Move Excel in DeFi.
Decentralized Finance (DeFi) has brought about numerous opportunities, but it has also encountered several challenges, mainly centered around the blockchain Trilema; Security, Decentralisation, and Scalability. All these three are responsible for the speed of transactions on any blockchain. Let’s dive into these and other advantages that make Aptos best suited for your best DeFi dApp.
• Smart Contract Functionality and Security
The Aptos blockchain supports smart contracts, which form the bedrock of any DeFi platform. The Move Language is the native language for writing contracts on the Aptos network. The Move language is renowned for its simplicity and inherent safety.
The history of DeFi is not bereft of hacks that have led to the loss of funds on different blockchains like BSC, Ethereum and the like, some due to poorly written smart contracts and others due to human errors and social engineering. The Aptos blockchain design philosophy prioritizes security and predictability, aiming to prevent many of the vulnerabilities that have affected other blockchain platforms. As humans could get attached to their finances, security is a must for DeFi and Aptos has this figured out.
How does Aptos Fix Security in DeFi?
- Secure Smart Contract Language: Move language is the native smart contract language for Aptos. The language is suitable for DeFi smart contracts development due to its high focus on the security of assets through features like resource definition, static typing, formal verification, etc. The Move prover plays a central role in enhancing security across the Aptos blockchain, serving as a primary validator for smart contracts crafted in the Move language. This prover introduces an additional layer of protection, fortifying the behavior and execution of smart contracts.
• Decentralization and Transparency:
History is laced with stories of bad management of customers’ funds by banks which led to bank runs. The largest bank run in modern history happened this year, at Silicon Valley Bank. The centralized and closed nature of the current traditional banking system makes it difficult or impossible for individuals to monitor activities going on with their finances, and save in banks. While blockchain generally solves the problem of transparency, some chains still maintain some elements of centralization. However, Aptos solves and continues to expand its nodes and validators across the globe.
Some months ago, the Aptos Foundation announced the introduction of delegated staking to Aptos. Petra Wallet also launched its mobile wallet with a delegated staking feature. All a user ought to do is delegate a minimum of 11 APT to an existing validator thereby improving decentralization on Aptos. This makes Aptos better suited for DeFi as users' funds are not much controlled by an individual or an organization influenced by the government or an oligarch.
• Scalability and Efficiency:
Imagine the panic in the hearts of DeFi degens when the Solana network went down in early 2023. Imagine how much loss could have been incurred when holders panic sold, hence plummeting the price of Sol from $23.50 to $21. While this article is not focused on the inefficiency of Solana or other existing layer one chains, we thought to run a quick comparison as comparing sometimes helps appreciate the superiority and uniqueness of something over the other, in this case, the superiority of Aptos Blockchain over Solana.
Broadly speaking, Aptos uses a separation technique to distribute loads between several nodes. This allows for effective, concurrent processing of a large number of transactions. This goes on with horizontal scalability, which allows for increased bandwidth with the growth of the Aptos network.
The three main bottlenecks of blockchain scalability are Throughput, Finality, and Confirmation time. Aptos is notable for its high transaction throughput in terms of transaction per second(TPS) and its time to finality enabled by its modular architecture which has decoupled transaction dissemination and consensus. In addition, Aptos confirmation time is averaged at 5mins, which is way faster than many layer 1 blockchains. With continuous input from the Aptos labs team and open-source contributions from the Aptos community, all these three can only get better. Indeed, there lies an interesting future for the Aptos blockchain.
Aptos currently differentiates itself from Ethereum by having a greater transaction throughput. Aptos can confirm transactions in mere seconds, while it takes Ethereum more than a minute to do the same. Aptos also runs on 16 times more CPU cores than Ethereum. These and more make transactions on the Aptos network very fast making it best suited for developing your DeFi protocol.
• Friendly Environment for Developers:
Apart from the Move language being a relatively easy programming language to grasp, the Aptos ecosystem is known for its ever-supportive terrain. From its clear and comprehensive documentation to the robust development tools, Aptos stands out as one of the most developer-friendly environments in web3. Developers can also utilize the funding opportunities made available by the Aptos Foundation and other bodies in the ecosystem while leveraging relationships with the core blockchain developers on Aptos.
• Interoperability and cross-chain compatibility:
With standards established on the chain, Aptos supports interoperability within the chain. Aptos also supports cross-chain interoperability through interoperable smart contracts. While a chain like Polygon focuses on moving assets across Ethereum only, Aptos offers developers the flexibility to integrate with multiple blockchains, further increasing its spread in the world of DeFi.
• Oracle Integration
Many DeFi applications require real-world data feeds. Aptos supports Oracle integration. To empower developers with low-latency price information, the Aptos Foundation entered a strategic partnership with Pyth Data Association to introduce an automated price scheduler. This feature has set the ground for DeFi builders.
Wrapping Up
By carefully evaluating these technical advantages and more, existing DeFi platforms like Pontem, Thalalabs and Tsunami Finance have decided to drive down their tentacles into the concrete foundation built by Aptos. Aptos addresses the challenges currently faced by DeFi protocols on other L1s. It addresses blockchain scalability through the utilization of a modular and pipelined transaction processing approach. This entails the simultaneous execution of various processes including transaction dissemination, ordering of block metadata, parallel transaction execution, batch storage, and ledger certification. Aptos also addresses the problem of security through its carefully written smart contract language, Move.
In the ever-evolving blockchain world, it is safe to say building a strong foundation for all kinds of decentralized applications is important for the adoption of such chain, and ultimately, wide adoption of web3 generally. Aptos has done well in creating this foundation, particularly in supporting Decentralized Finance. All genuine builders are encouraged to develop DeFi protocols on Aptos based on all mentioned points in this article.