On Tuesday, decentralized finance (DeFi) lending and borrowing platforms based on Ethereum, Yearn Finance, Homora and Iron Bank all joined Optimism, the lawyer 2 network.
The reason for joining the protocol was to provide their users with better capital efficiency, security and cross-chain interoperability.
Benefits for Optimism
Thanks to this decision, Optimism users would now be able to use their crypto assets for borrowing purposes and also benefit from yield options, attractive rewards and competitive gas fees.
Decentralized finance (DeFi) essentially defines financial activities that do not use third parties and are conducted on the blockchain.
Meanwhile, layer 2 refers to the system that is built on top of the blockchains for processing more data.
The Iron Bank’s lead contributor, Puff stated that they had decided to launch on Optimism in order to improve the reliability, scalability and accessibility of DeFi.
Recent days have seen the popularity of Optimism go up and it has become one of the most widely used layer 2 platforms because of its low user fees and speed.
According to the statistics, the cryptocurrencies worth $320 million had been locked on the network via the applications built on it in January 2022.
As of Tuesday, this number has actually surpassed $1 billion.
The reason of switching
Yearn Finance’s integration lead, Dark Ghosty said that in times of a high demand for the network, the fees charged on Ethereum becomes insanely expensive.
In one such situation earlier this year, the network fees had reached a whopping $9,000 per transaction. Therefore, DeFi projects can become more accessible to people when they are built on networks like Optimism.
He said that users who were unable to access yVaults on Ethereum would be able to benefit from Optimism.
He added that Iron Bank offers additional liquidity flexibility because it is a lending partner for protocol-to-protocol.
Therefore, users do not have to worry about incurring high fees on a fast chain and still get the best yield, which is risk-adjusted, in DeFi.
According to Iron Bank, they would initially start a reward program comprising of about 11,500 iron bank (IB) tokens that would be allocated in the next month.
It said that these rewards would be accessible to users who supply DAI, USDC and weighted ether (wETH).
Furthermore an insurance and bug bounty campaign has also been launched by Iron Bank with Nexus Mutual and ImmuneFI.
The purpose of the campaign is to focus on preventing potential exploits against user assets, funds, along with data breach possibilities.
Apart from that, the decentralized finance (DeFi) company has also begun to offer its clients a decentralized price oracle with Chainlink.
This is essentially a trusted third party that provides the blockchain with data obtained from outside sources, which can be quite useful.
This marks the popularity and growth of the decentralized finance (DeFi) space, which has become a force to be reckoned with in the last couple of years.