Today, we are going to take a look at Reef Finance, a permissionless liquidity aggregator and yield engine that allows the integration of any DeFi protocol.
What Is Reef Finance?
Reef Finance is a liquidity aggregator and a multi-chain yield engine built on Polkadot, so on Substrate. The fundamental goal of the project is to make DeFi, which is currently segmented and communicates too little, more accessible to the average investor. Basically, this project is trying to solve the two big problems of the DeFi space: illiquidity and fragmentation.
Liquidity Aggregator & Yield Engine
Liquidity refers to the ability to trade assets at any point in time without causing drastic price changes, a phenomenon known as “slippage.”
In the case of a CEX, liquidity is ensured by the central authority which governs the platform and ensures its traffic by the fact that it is regulated and there is an entity responsible for everything that happens on the platform.
This gives people the confidence to use such an exchange, but it makes it possible for the central authority to charge fees, and it is based on the idea that client funds are safe in its hands.
DEXs, however, due to their decentralized nature, can only rely on certain mechanisms to attract customers, which are usually based on rewards, and this offers a greater degree of freedom.
Given the fees of CEXs, as well as the low liquidity and high slippage of DEXs, Reef Finance has come up with a solution that is somewhere in the middle.
It is no secret that there is a fairly high barrier to entry in this sector, due to the complexity of using certain platforms and the necessary financial knowledge.
DeFi is closely related to group psychology and trends, so here are two other aspects that a user should be aware of.
We also add to this the fact that each protocol has its own use cases and that several projects are fighting for supremacy in a certain field, and we can see how fragmented this sector is.
What do liquidity aggregator and yield engine mean? A liquidity aggregator – in our case, Reef Finance – is a platform that accesses the liquidity on different CEXs or DEXs and brings it to the user, thus making the whole process easier. It integrates even more protocols into a single one and eliminates price discrepancies.
A yield engine, at least, in this case, is a basket of digital assets in which a user can easily invest cross-chain while earning yield.
The yield engine finds the best opportunities to generate yield across the entire DeFi spectrum, provides assurance through integration with different protocols, and works based on artificial intelligence and machine learning.
What Does Reef Finance Do?
Reef Finance, through a blockchain that is based on a series of smart contracts and is compatible with Ethereum Virtual Machine, combines several products into a single ecosystem.
It is largely based on the following main components, namely:
- The liquidity aggregator and yield engine we’ve talked about, and
- Smart Asset Management, where users can manage their assets through a fairly friendly interface that comes with that part of AI, helping in the decision-making process.
AI, or artificial intelligence, is introduced into the system through an off-chain oracle, which gathers data from social networks, news sites, tweets, and even from on-chain data, to provide data and analysis which can be utilized by users.
Since it is built on Substrate, Reef plans to bid for a parachain on both Polkadot and Kusama. On top of that, according to the project’s roadmap, the team is working on many new elements, most of which are scheduled for this year’s Q3.
Testnet/Mainnet for Reef Finance
The test version of the mainnet was launched on May 28th this year, with the idea of having a network that works identically to the main network, only that developers can reset it to the initial parameters at any time.
The reason is simple. If during this time problems of a technical nature arise, everything can be reset. After this 30-day interval, as announced by the team, the transition to the chief mainnet will take place smoothly, and the new mainnet will no longer be reset.
At the center of this ecosystem is the REEF token with a maximum supply of 20 billion and a circulating supply of 12.6 billion. The token has several functions within the ecosystem. Fees are paid using REEF, the reward structure in staking also uses REEF, and there are other network collators that play an important role in supporting the platform.
They process transactions, implement smart contracts, and propose changes, functions for which they are paid, of course, in REEF. In addition, through the DAO structure, users can be part of the decision-making process. The voting power of any entity or individual is directly proportional to the amount of REEF they have staked.
Partnerships and Roadmap
Reef Finance has many interesting partnerships, such as with ChainLink, Matic, TRON, and Harmony, but the most important is probably the one with Binance Access that allows you to buy cryptocurrencies using fiat.
Through this integration, the liquidity on the platform is also expected to increase. If we look at the roadmap, we see that the team comes with improvements and updates constantly. Some of them are the Reef debit card, the auction for the Kusama parachain, and fiat gateways.
What is worth keeping in mind regarding this project is that DeFi faces many obstacles on the way to mass adoption. These include, as we have already said, interoperability and fragmentation. In order to benefit from all that DeFi can offer, interactions with many different platforms are required, and many of them are complex for the average user.
This creates a psychological barrier and keeps many potential DeFi users at the entrance, waiting for more simplicity and clarity. The fact that Reef wants to take down these obstacles gives it a solid use case both now and in the future.
If Reef manages to do this and the platform continues to attract users and facilitate access to DeFi, it can grow a lot in the future. At the same time, this niche is a highly competitive one, which makes it all the more necessary for the Reef platform to be constantly improved.
Reef has real potential and support from the community, so it remains to be seen how the product will evolve and how the parachain auctions on Polka and Kusama will go.