DeFi is none other than a decentralized counterpart for traditional finance instruments and services. In this article, we’ll cover how to make the most of the sector using Ethereum APIs and some alternatives such as KuCoin APIs.
Why DeFi is on the rise
Decentralized Finance services supercharged by blockchain technology are rapidly growing in popularity. Some of the benefits of choosing these services over traditional ones include the following:
- Having control over holdings without trusting any banks to take custody of your funds;
- Speed: Pushing operations through the blockchain again demands no third party and, therefore gets faster and cheaper as no fee is paid to intermediaries.
- Trusting a code instead of centralized authorities: Smart contracts enable DeFi by imposing rules that allow peers to interact directly without having to trust anyone but the code.
One of the main prerequisites for that is DeFi gives a way for people to break free from monopolistic traditional banking as it allows them to use digital money to trade, lend, and buy things directly without centralized intermediaries.
Some of the most used types of dApps in DeFi include decentralized exchanges, lending, and staking protocols.
Decentralized exchanges (DEXs) like Uniswap, Pancakeswap, and Curve, as opposed to centralized trading platforms, are not controlled by anyone but users. It’s a place to exchange assets and deposit cryptocurrencies into liquidity pools (smart contracts that automatically facilitate trades between assets). In return for providing liquidity for the pool, users receive a share of fees generated by trading.
Lending & staking platforms enable users to both borrow and lend assets to and from each other rather than centralized entities. Lenders can earn interest on crypto holdings by lending them out to others without having to actively trade, while borrowers get better offers and lower fees.
Nevertheless, it’s important to add that these types of services carry inherent risks. Smart contracts may be vulnerable to hacks and exploits. Impermanent loss fraught by changes in asset prices is also the case. Thus, it makes sense to use battle-tested platforms.
Ethereum, the king of DeFI
Before we dive into the details of using Ethereum APIs for an enhanced DeFi experience, let’s quickly overview why this blockchain is tightly associated with the decentralized finance sector.
Ethereum launched four years after Bitcoin aspired to allow doing things with the blockchain that were impossible with Bitcoin. Specifically, it introduced smart contracts to the community for building DeFi applications on top of it.
While today, there are many smart-contract-based chains like Ethereum that make it possible to launch DeFi-oriented applications, they may not have the same security and user trust.
Using APIs in DeFi
For traders, developers, and enterprises APIs are a powerful tool to boost the start of the DeFi journey and assist along the way.
API stands for Application Programming Interface, which provides a simple way for apps or other types of software to interact with each other and exchange different types of data. SOAP, RPC, WebSocket, and REST are the four types of interfaces that can be used individually or combined.
Endpoints are the final destination of API calls that may be represented as another application or a server. Similarly, blockchain nodes may also be accessed via APIs.
For traders, Ethereum APIs build a bridge to the blockchain to get information on ETH accounts, transactions, fees, and blocks directly from the blockchain to help make reasonable trading decisions.
For developers, it’s much easier to integrate APIs into their programs rather than write lengthy strings of code for pretty much the same end result. One of the use cases is to integrate APIs from existing DeFi projects for dApp development while the second case is much more powerful.
How GetBlock APIs assist in Web3 development
GetBlock is a renowned node service that connects its users directly to 50+ blockchains. Developers widely use the service to embed Ethereum API endpoints by GetBlock into their DeFi applications without the need to spin up a whole node to provide the blockchain data to users or push transactions directly on-chain.
However, this blockchain is known for being way more expensive to operate. There are other protocols that provide similar opportunities at cheaper fees. One example is the KuCoin Community Chain which is known for low fees and Ethereum compatibility. KuCoin API are also provided by GetBlock and can be accessed via free or paid tariffs from the user’s account.
While there’s a demand, decentralized applications offering DeFi service are being built at an accelerating pace. Using Ethereum APIs or Kucoin APIs for launching your own dApps may be a smart choice.