Decentralized Financing (DeFi), is gaining popularity in crypto, which is a good thing. These applications provide unprecedented opportunities for users from all backgrounds. It also makes it easy to use and completely transparent. Today, the focus will be on Proof of Reputation (PoR), titled the future of DeFi by many—read on to find out why, and how you can take advantage of it.
Decentralized finance (DeFi), in its simplest form
A brief overview of Decentralized Finance is required before we get into the details of Proof of Reputation. DeFi simply refers to all protocols that do not have central control, use open blockchain technology and offer equal access for everyone. DeFi can be described as liquidity-providing protocols, Decentralized exchanges (DEXs), stake options and many other concepts.
Evidence of work, proof of stake, and proof of reputation
After everyone is familiar with the basic concepts, let’s move on to the detail. DeFi and all other crypto projects use a consensus mechanism to secure their services. These algorithms ensure that all nodes, which are computers that maintain the network, are on the same page regarding transactions. This reduces the risk of malign behavior, in certain cases even eliminating it altogether.
These three consensus mechanisms are Proof of Work or Proof of Stake. And the current favorite is Proof of Reputation. This revolutionary form of Proof of Authority.
Proof of Work (PoW), which is a contract between nodes that specifies the computation performed, relies on this agreement. Although it is somewhat secure and important blockchains like Bitcoin use it, critics have criticized it for being unfriendly to the environment and its limitations in scaling.
Proof of Stake (PoS), used by Cardano (ADA) for instance, managed to improve on some of PoW’s flaws, as it doesn’t require energy-intensive actions to reach consensus. Instead, nodes need to put up through staking tokens, which functions as a sort of collateral guaranteeing that they won’t tamper with the network; if they do so, their stake is seized by the algorithm. However, the main issue of PoS is its speed, as it can’t quite deliver the throughput demand would dictate.
Kaiba DeFi’s Proof of Reputation is the last and most efficient method. It is more secure than Proof of Authority. The network is run by nodes who are responsible for ensuring that the rules are adhered to. They also put their identities at risk. This not only allows for a transparent and evident way of verifying nodes, but it’s also perfect for reaching consensus in a fast and reliable manner.
In practice, there is evidence of good reputation
To illustrate the working of PoR, Kaiba DeFi’s applications can be observed.These applications manage to provide superior speed and significantly lower fees than counterparts thanks to their underlying Proof of Reputation system. As an example, take KaibaEx, the project’s Decentralized Exchange (DEX), which offers up to 20% less network fees than other exchanges, such as Uniswap, and facilitates fully commission-free trades, which is unmatched within the industry. Another great instance would be trading KAIBA, Kaiba Defi’s native crypto token, which, thanks to PoR and their contract optimization, can be 60% cheaper to transact with than other comparable ERC-20 tokens.
Let’s end with some thoughts
The revolutionary Proof of Authority version, known as Proof of Reputation, unlocks unrivalled opportunities for those projects that are able to recognize this potential and develop their ecosystem around the PoR. Kaiba DeFi was the first to use PoR. Looking at the results it’s clear that this innovative consensus mechanism is indeed the future for Decentralized Finance.