Proof of Reputation: The Future Of DeFi
March 16 2022 - 1:42AM
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Decentralized Finance (DeFi) has become one of the most popular
concepts of the crypto world recently, and with good reasons. Its
applications not only opens unprecedented opportunities to users of
any background, but it does so in user-friendly, and fully
transparent ways. 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 a nutshell Before jumping into details about Proof of
Reputation, a brief introduction to Decentralized Finance (DeFi) is
needed. Essentially, DeFi is an aggregate term for all protocols
that are not controlled by any central authority, leverage open
blockchain technology, and provide equal opportunities for users to
utilize financial services and other benefits through
cryptocurrencies. There are numerous DeFi concepts out there,
including liquidity providing protocols, Decentralized Exchanges
(DEXs), staking options, and many more. Proof of Work, Proof of
Stake, and Proof of Reputation Now that everyone is up to speed
about the fundamentals, the attention will shift to the specifics.
Generally speaking, DeFi and other crypto projects all use a
so-called consensus mechanism to securely provide their services
and perks to users. Such algorithms are needed so that the nodes
(computers) maintaining the network are always on the same page
about all the transactions, and that the chance of malicious
behavior is minimized, or even eliminated in some cases. The three
most popular consensus mechanisms are Proof of Work, Proof of
Stake, and the current favorite, Proof of Reputation, which is a
revolutionary version of Proof of Authority. Proof of Work (PoW) is
based on an agreement between nodes on computation performed. While
it has been proven to be somewhat secure, and significant
blockchains such as Bitcoin rely on it, it has been criticized for
its environmentally unfriendly nature and scalability limitations.
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. Finally, Proof of Reputation
(PoR), which is a more secure version of Proof of Authority (PoA),
implemented by Kaiba DeFi, is considered the most up-to-date and
efficient system among all others. In essence, nodes run the
network and ensure the rules are followed by putting up their
identity at stake. 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. Proof of Reputation in
Practice 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. Final thoughts Overall,
as demonstrated above, the groundbreaking version of Proof of
Authority called Proof of Reputation (PoR) unlocks unparalleled
opportunities for projects that recognize its potential and build
their ecosystem around it. Kaiba DeFi was among the first to fully
implement and take advantage of PoR, and when looking at their
results, it is safe to say that this novel consensus mechanism is,
indeed, the future of Decentralized Finance.
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