While there have been several projects in the space of decentralized finance (DeFi), the common difficulty that users face stems from the issue of interoperability. For DeFi users to take advantage of various products that can meet their needs, they will have to interact with multiple independent applications. Reef Finance addresses that.
Reef Finance is a project that aims to stack all of these commonly demanded services altogether. Not only does this ease user access to different DeFi-based products, but also simplifies the whole experience. Through Reef Finance, users can purchase, trade, stake, and even borrow digital assets, all under one single platform.
Table of Contents
Background
Denko Mancheski, CEO of Reef Finance, conceptualized the project as a solution to the psychological barrier that dampens DeFi adoption. According to Mancheski, the problem with many projects in the space is that they have multiple offerings that could be too overwhelming. This isn’t something easy for newcomers to the space.
According to Mancheski, their “job as a global development community is to abstract away complexities.” He further adds, “from a technical point of view, we’re moving towards being able to onboard a simple non-tech savvy user.
To address the issue of DeFi’s growing complexity, Macheski anchored Reef Finance in the mission of making it easy for anyone to enter the DeFi market and try out new projects and tokens.
What is Reef Finance?
Reef Finance is a cross-chain array of DeFi products and services. Simply put, it can be likened to a one-stop-shop where you can see some of the most popular DeFi offerings in a single platform. It is also Polkadot-based, which means that it can run much faster than Ethereum. In addition, it is much more affordable because it doesn’t have to suffer from the skyrocketing transaction fees in Ethereum, especially when considering the exuberance brought about ETH 2.0.
Through smart contracts, Reef Finance aggregates the liquidity provided by the markets it is linked to. It also runs a yield engine that connects cryptocurrency buyers and sellers to different liquidity pools supplied by exchanges and the DeFi space.
For beginners, there is also a crypto asset management function on the platform that is driven by AI. This service is customizable as well. Furthermore, it corresponds with different risk categories that could meet a user’s financial objectives.
Reef is a non-custodial platform, meaning users do not have to worry about their private keys as much. And because it is powered by Polkadot, it also enjoys top tier security that is resilient from attacks. Basically, the likelihood of their money being stolen from the platform is quite low.
Reef Trading Terminal
Reef uses Polkadot technology, the atomic bridge, to aggregate the liquidity of linked decentralized exchanges on its ecosystem. This makes the biggest exchanges like Binance, Huobi, or OKEx, accessible on Reef’s platform. With access to even centralized exchanges, users can enjoy greater liquidity.
Reef Yield Engine
Reef simplifies yield farming, a complicated service but a potentially profitable asset management activity in DeFi. This engine allows anyone to have a stake in different asset baskets and earn yield rewards for doing so. It also allows them to automate DeFi services such as lending, borrowing, and mining. Users do not have much to worry about because they can access AI for this and configure its algorithms based on their needs and goals.
Reef Intelligence Engine
What has to be highlighted as well is the AI and machine learning-powered function that powers Reef’s automated services.
The Reef Intelligence Engine is an off-chain oracle that provides data to proxy smart contracts in the platform. Basically, it gathers reliable data off-chain and feeds it to the smart contracts so they can function accurately. It monitors different metrics, social media data, news, and on-chain data, to produce insights as well.
The Reef Engine uses the data coming from this function to manage assets and determine investing opportunities. This way, theory can create profitable allocations through multiple asset baskets while keeping note of their risk levels.
REEF Token
Reef is the native, utility token for the Reef platform. It can be used as a medium of exchange, but some of its main functions in the platform include powering the reward structure for the protocol and its governance mechanism.
Network collators perform the task of maintaining the accuracy and reliability of their networks. They keep a copy of the full state of parachains at a particular point in time and produce new blocks that will form part of the whole Polkadot ledger. For this, they are rewarded with Reef tokens.
Reef tokens are also used as gas payments that are transferred to collators as fee for their services. Transactions that require collator fees include transaction processing, deployment of smart contracts, and submitting proposals, among others.
Collator fees are also accrued during on-chain interactions, such as entering and exiting asset baskets. This is also important as it powers the automated rebalancing function of the platform which moves liquidity between different pools.
Governance
Stakers of the Reef liquidity pool are also given voting rights. This allows them to be part of the decision-making process taken to amend and update protocol parameters, among others. Here are some of the decisions that they could be called on to vote:
- Changing asset basket structure, including fees and new proposals;
- Modifying reserve limits, as well as adjusting yield rewards and interest rates;
- Amending liquidity pool attributes like voting power time function and dynamic interest;
- Revising the structure of the DAO.
The voting power of any stakers is also proportional to the amount of REEF that they have staked in smart contracts.
Yield Distribution
Another function of the platform is that it allows users to stake in liquidity pools and earn yield rewards. In Reef, users can choose the payout ratio between ETH/USDC and REEF token. If they wish to get their reward in REEF tokens, they get better rates. This way, they can incentivize people to hold more REEF tokens which they can also stake in return, and earn more interest from.
There is an ETH/USDC pair kept in smart contracts. They are used to:
- Pay interest fees for those who stake REEF tokens;
- Buyback and automated market making functions;
- Accumulate revenue and support the platform’s cashflow.
While all of these might sound too technical for any user, the platform abstracts these functions through the help of smart contracts that automate such processes. All in all, the platform is still user-friendly as it is easy for anyone to get on-board and earn profit from their digital assets.
Conclusion
For so long, many developers in the DeFi space sought to make their services understandable and responsive to the needs of the users. While this has been a welcome development for the whole cryptocurrency ecosystem, this was a little bit counterproductive in attracting newcomers to the DeFi space. The fragmentation and complexity of many DeFi platforms still hinder more adopters.
For this reason, Reef is seen as an ambitious venture as it caters to everyone who wants a piece of DeFi, regardless of their experience and expertise. By reliably automating DeFi functions, users can find new opportunities to better earn profits and manage their digital assets.
Today, there is growing institutional support for DeFi projects like Reef. And if it becomes a successful platform, it could significantly boost the entry of newcomers to the DeFi space like we’ve never seen before.
