Radix Project Review – Pioneering a Next-Generation DeFi Protocol
The DeFi train keeps on steaming and there are no signs of stopping. With its total value locked closing in on 10 billion USD and projects shooting out of the ground left and right, the DeFi sector is becoming a massive powerhouse for the whole crypto industry.
However, an ongoing problem with this development is that the current DLT infrastructure is not very suitable for the functionality and scalability demands posed by the DeFi industry. Let us take a deep look at Radix DLT, the first blockchain network that is specifically designed for DeFi.
Cerberus BFT – Scalable and composable
There are multiple approaches to the scalability problem out there. Some of the most promising approaches revolve around sharding. Essentially, these projects create a higher transaction capacity by outsourcing DApps to their own blockchain that runs parallel to a central main chain in one form or another.
While this has excellent potential to create transaction capacity, the problem lies in transaction composability. Many DeFi use cases, especially sophisticated yield farming strategies rely on stringing a series of transactions together in a single go. Radix has coined the term atomic composability for these procedures.
Radix is powered by the Cerberus BFT consensus mechanism. Rather than splitting up DApps to a limited number of shards, DApps on Radix are represented on all shards of the network, while can scale up to an unlimited number of shards, with an immediate cross-shard consensus. This means that transactions can be braided together atomically like they would happen on a single blockchain, but with a practically unlimited scalability.
These capabilities have been tested and formally proven under an academic partnership with the Exploratory Systems Lab at UC Davis, led by Prof. Mohammad Sadoghi.
Radix also works on providing incentives for open source developers. For this purpose, Radix runs a library of modular and functionally separated code components, which can be reused by other developers in order to build more sophisticated functionalities.
Any developer who contributes to the Radix component catalog may charge a royalty fee that is incurred any time the component is used. Royalty fees are automatically charged on transactions, similar to gas fees on other networks. This makes sure that developers are fairly compensated for their work. At the same time, developers are incentivized to create useful components and to reuse existing code in order to build more complex components.
With this approach, Radix applies the fundamentals of a free market economy to open source development. Thus, coders are incentivized to develop the most basic and most needed components first and make them available for others to use and reuse them. The higher the demand for their components, the higher their rewards. Subsequently, they have a higher incentive to build more complex components out of the existing component catalog to further increase their revenue.
Token Wrapping Services
Besides building a highly scalable sharded blockchain network with atomic composability, Radix seeks to build bridges to other blockchains through token wrapping services. The first step of this was a partnership with the crypto custodian Copper.io.
The first step of the partnership with Copper was a custodial service for the upcoming Token Sale for the upcoming token sale, in which Copper will manage the proceeds. Next to that, Copper can take custody of tokens that are not native to the Radix network and issue a wrapped version of the token on Radix.
For a more decentralized solution to token wrapping, Radix has also recently partnered with Ren Protocol. Together with other leading DeFi projects such as Aave, Kyber Network, DDai, Radix has joined the Ren Alliance, which can potentially bring a vast range of tokens to the Radix network, completely without a centralized counterparty risk.
Thanks to this, Radix is highly interoperable with existing DLT structures and assets. All of the tokens for which wrapping is supported can be transferred to the Radix network and used in the DApps within the Radix ecosystem.
A Look forward to the future financial World
In a recent blog post, the Radix team has released a roadmap, detailing how they envision the future development of DeFi. In this post, they have identified four main requirements for DeFi mass adoption. According to them, the requirements are fast, low-cost transactions, security by design, atomic composability, and development incentives. They write:
Ultimately, Mainstream DeFi will happen when all of the barriers holding back DeFi today are removed, without compromising decentralization. It happens when developers are finally given the tools they need to build apps that can surpass the services offered by the traditional financial industry.
Radix is set to take down all of these barriers. Thanks to the Cerberus BFT consensus model, they can provide a DLT network with virtually unlimited scalability and nearly instant transaction settlement and atomic composability.
Rather than implementing all transaction functionalities in turing-complete smart contracts, Radix developers construct modular components. This adds a layer of security to the Radix ecosystem, since the behavior of these components is designed in a purely functional fashion, eliminating many potential sources of bugs, which are present in smart contract languages such as Solidity.
This also means that the most basic and well-tested components move on to become the building blocks for more sophisticated components and DApps. Thanks to the Developer Royalties System, developers furthermore have a monetary incentive to construct these building blocks.
In sum, Radix, as the first-ever DLT network specifically designed with DeFi in mind, has the potential to become a powerful infrastructure tool for DeFi projects and developers. This will constitute a large step towards mainstream DeFi adoption.