🤵‍♂️FAQs

FAQs

What is Layer 2?

Layer 2 refers to a layer in the architecture of a blockchain that is built on top of the base layer, or Layer 1. It is designed to improve the scalability and performance of the blockchain by enabling off-chain transactions and data storage.

Layer 2 solutions aim to address the limitations of Layer 1 blockchains, which can be slow and expensive due to the need to process and confirm every transaction on the network. By moving some of the transactions and data storage off-chain, Layer 2 solutions can potentially reduce the burden on the base layer and improve the speed and cost of transactions.

There are several different types of Layer 2 solutions, including payment channels, sidechains, and state channels. These solutions use various techniques to enable off-chain transactions and data storage, such as using smart contracts or multisignature addresses to facilitate transactions and secure data.

Layer 2 solutions are an important area of development in the blockchain space, as they have the potential to significantly improve the scalability and usability of blockchains. However, they also come with their own set of challenges and trade-offs, and their implementation and adoption can vary depending on the specific needs and goals of a particular blockchain network.

https://academy.binance.com/en/glossary/layer-2

What is Perpetual Trading?

Perpetual trading, also known as perpetual swaps or perpetual contracts, is a type of derivative financial product that allows traders to speculate on the price of an underlying asset without an expiry date. These contracts have features that are similar to futures contracts, but they do not have a fixed expiry date or settlement date. Instead, they are designed to be held indefinitely, with the investor making periodic payments to maintain their position.

This allows traders to take advantage of price movements on a continuous basis, rather than being limited to the expiry of a traditional futures contract. Perpetual trading is commonly used in the cryptocurrency market, where it is often offered by decentralized exchanges (DEXs) as a way for traders to speculate on the price of various digital assets.

https://academy.binance.com/en/articles/what-are-perpetual-futures-contracts

Transformation of Industry

Web 1.0, Web 2.0, Web 3.0

The financial service industry is accelerating the adoption of Web 3.0.

	Web1.0 The Hypertext Web	Web2.0 The Social Web	Web3.0 The Semantic Web
Features	Read-only and Static Web	Interactive, read and write	intelligent and decentralised
Use cases	Content and information publishing	Social Media, Microblogs content hosting, podcasts	DeFi, tokenization of asset, online gaming, distributed ledgers, NFT, CBDC, P2P transfer
Examples	CNN, BBC	Amazon, Apple, Meta, Microsoft, Twitter, Google, Tik Tok	Amazon Alexa, Wolfram Alpha, Apple’s Siri

Web 3.0 and Evolving Landscape

Change the existing narrative by introducing blockchain technology and artificial intelligence into the play.

Blockchain and Decentralization

• Provide the assurance of cryptographic security for user data.

• Help in encouraging communication between software and browser plugins.

• Leverage blockchain technologies to ensure transparency in the ecosystem, thereby providing better scope for audits and security.

Why DeFi is an Important Trend in Web 3.0?

Decentralized finance on blockchain as part of Web 3.0 Today, we see DeFi not just mirroring traditional finance, but going beyond what is currently offered.

Life Before Decentralized Finance

DeFi	Traditional Finance
You hold your money	Your money is held by companies
You control where your money goes and how it's spent	You have to trust companies not to mismanage your money like lend to risky borrowers
Transfers of funds happen in minutes	Payments can take days due to manual processes
Transaction activity is pseudonymous	Financial activity is tightly coupled with your identity
DeFi is open to anyone	You must apply to use financial services
The markets are always open	Markets close because employees need breaks
Its built on transparency-anyone can look at a product's data and inspect how the system works	Financial institutions are closed books: you can't ask to see their loan history a record of their managed assets and so on

The Rapid Rise of DeFi

DeFi has grown at an impressive pace since the summer of 2020.

DeFi really took off in 2020.

1 BILLION DOLLARS

The total value locked (TVL) into DeFi projects sat at about $1 billion worth of cryptocurrency deposited in DeFi applications.

50 BILLION DOLLARS

The TVL figure exceeds the $50 billion mark. Peaked at over $181 billion in Dec

2021, according to data from DeFi Llama.

https://defillama.com

So how does DeFi conform to the principles of Web 3.0?

• Non-custodial

  Non-custodial means the decentralized applications you interact with don’t control your data – only you do.

• Open

  Unlike in the traditional financial system, anyone is able to gain access. There are no gatekeepers who work to find reasons to disenfranchise people or limits on how much and where you can send assets.

• Transparent

  Any transaction is traceable and can be inspected by anyone, with code for applications used to perform financial operations being open-source.

• Decentralized

  Transactions are verified by nodes, computers around the globe running the blockchain’s software. This ensures that one centralized party cannot gain control.

In the DeFi sphere,Dapps are becoming more sophisticated and reaching into new areas.

Here are some of the popular types of applications.

• Decentralized exchanges (DEXs): DEXs are a hot type of online exchanges which connects users directly so they can trade cryptocurrencies with one another without trusting an intermediary with their money, whether U.S. dollars for bitcoin or ether for BTC.

• Lending platforms: These platforms use smart contracts to replace intermediaries such as banks that manage lending in the middle.

• Derivatives – futures and options exchanges built on decentralized exchanges are the next big thing.

• Prediction markets: The goal of DeFi versions of prediction markets is to offer the same functionality but without intermediaries.

Binance Smart Chain

In 2020, Binance Smart Chain (BSC) was introduced to the world. BSC was born in time for the DeFi revolution.

Advantages of Binance Smart Chain(BSC)

• Transaction Speed

  One of the fastest smart contract platforms.

• Generate a Block

  in three seconds, 4X faster than Ethereum’s 13 seconds.

• Low Gas Fees

  Costs an average of 5 Gwei, 8x cheaper than Ethereum.

• Cross-Chain Compatibility

  Increases token liquidity, utility, and value.

• EVM-Compatibility

  it’s faster and cheaper to run dApps on BSC.

• Credible Platform

  An important role in the PoSA consensus by vetting all validators on the network, ensuring that the blockchain is secure and reliable.