Mid term test blockchain group bears topic dao, defi, nft

VIETNAM-KOREA UNIVERSITY OF INFORMATION AND COMMUNICATION TECHNOLOGYCOMPUTER SCIENCE FACULTY MID-TERM TEST BLOCKCHAIN GROUP BEARS TOPIC: DAO, DEFI, NFT Members: Tran Thi Kim Oanh - 19IT3

VIETNAM-KOREA UNIVERSITY OF INFORMATION AND COMMUNICATION TECHNOLOGY

COMPUTER SCIENCE FACULTY

MID-TERM TEST BLOCKCHAIN

GROUP BEARS TOPIC: DAO, DEFI, NFT

Members: Tran Thi Kim Oanh - 19IT3

Nguyen Trung Hieu – 19IT3 Pham Tan Truc – 19IT3 Truong Quoc Khanh – 19IT3

Visiting Lecturer : Truong Quoc Tuan

Da Nang, January 2022

VIETNAM-KOREA UNIVERSITY OF INFORMATION AND COMMUNICATION TECHNOLOGY

COMPUTER SCIENCE FACULTY

MID-TERM TEST BLOCKCHAIN

GROUP BEARS TOPIC: DAO, DEFI, NFT

Members: Tran Thi Kim Oanh - 19IT3

Nguyen Trung Hieu – 19IT3 Pham Tan Truc – 19IT3 Truong Quoc Khanh – 19IT3

Visiting Lecturer : Truong Quoc Tuan

Da Nang, January 2022

LIST OF PICTURES 4

1 DAO OVERVIEW 1

1.1 General introduction about DAO 1

1.2 DAO on the market 2

1.3 Pros and Cons of DAO 3

1.4 Potential of DAO: 4

1.5 How does DAO work ? 4

2 DEFI OVERVIEW 5

2.1 General introduction about DEFI 5

2.2 Some applications of DeFi 5

2.3 Pros and Cons 6

2.4 Potential of DEFI: 7

2.5 How does DEFI work ? 7

3 NFT OVERVIEW 8

3.1 General introduction about NFT 8

3.2 Application of NFT in the market 9

3.3 How does NFT work? 10

3.3 The potential of NFT 11

4 DEFI AND NFT 11

5 COMBINATION 12

5.1 Combination of DAO and DEFI 12

5.2 Combination of DAO and NFT 14

CONCLUSION 16

REFERENCES 16

LIST OF PICTURE

Figure 1 1 Decentralized Autonomous Organization (DAO) 1 Figure 1 2 NFT Gaming 2 Figure 1 3 BitDao 3 Y

Figure 5 1 DeFi DAO 13

DAO, DEFI, NFT

Authors: Group Bears

Date: 25/1/2022

Version: Version 1.2

Circulation: Internal, Project Partners, Public

1 DAO OVERVIEW

1.1 General introduction about DAO

DAO (Decentralized autonomous organization) is a decentralized autonomous organization, designed for automation and decentralization It operates as a form of venture capital fund, is based on open source code, and does not have a typical management structure or board of directors To be fully decentralized, the DAO was not tied to any particular country, even though it used the Ethereum network

For example: with a company there is a CEO, and that director's decision will affect the entire company, and of course, that is also the weakness of the centralized model, but with DAO Otherwise, the decision-making power will be voted on by the majority, simply understood that all decisions and directions will be voted by the majority of investors

Figure 1 1 Decentralized Autonomous Organization (DAO)

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The idea of DAO, when the operating apparatus of the whole organization is replaced

by machines or code, DAO model is similar, a group of people pooling resources to accomplish a goal DAO smart contracts will be self-powered machines to achieve that goal All programming code will be public and testable by everyone Every action performed by a computer program will be recorded and cannot be modified These decisions will be voted on by a transparent majority In the DAO, the community can check where the middleman resources are received or transferred The community will decide who the resource goes to through voting, or verify the exact metrics of how it will

go and how it will go In addition, the community can contribute comments and raise comments come up with ideas to improve the operating idea of DAO, this is considered

as an advantage of DAO

Basically, the DAO is a decentralized autonomous organization that is encapsulated

in two terms: decentralization and self-operation For the centralized model, there is a triangular model, which means that the decision-making power will be concentrated on the person standing at the top of the person in charge who runs the whole decision As for the DAO model, all decision-making power will be counted on the majority

1.2 DAO on the market

NFT Gaming: with the ability to make money from players, a new model was born related to NFT and gaming investment funds operating under the DAO model DAOs will generate revenue by increasing the price of NFTs when they buy from the beginning, or lease back to members of the DAO the NFT that the DAO fund buys

Figure 1 2 NFT Gaming

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For example, YGG is one of the first gaming investment DAOs in the virtual currency market, YGG customers will contribute assets of NFT tokens to the fund And this fund will be used to invest in NFT in games For each game, YGG will create a "supDAO" department to specialize in support and optimal operation as well as increase revenue for NFT tenants

BITDAO: will invest in DEFI products in the ecosystem and support great potential projects The assets in the common fund will be exchanged with the project tokens that BitDAO is investing in, and at this time the common fund will be home to a large collection of tokens of different projects And the main revenue comes from the success

of those projects and makes the token increase in price

Figure 1 3 BitDao

1.3 Pros and Cons of DAO

Pros:

o Voting rights are shared among members

o Remove the trust factor, increase transparency

o Applying the proposed game theory will create benefits for the majority

o Concentrating the vision of many individuals, expanding the vision for the whole community

o Investors sending money from all over the world can stay anonymous

o All done automatically

Cons:

o Legality: some countries still do not recognize or agree with the laws in their host countries

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o Likely to be attacked because there is no specific party to manage.

o Bad Decisions: Unprofessional decisions when the majority of unskilled community members are higher than the rest

o Delayed: the operation time as well as giving a vote often takes a long time, causing damage to the participants

o No privacy: potentially revealing strategy to rival companies

o Centralization still exists in the decentralized community

1.4 Potential of DAO

Currently, the development of DAO is said to be tied to blockchain and decentralization In addition, in the context that traditional organizations are recording many incidents related to the abuse of power and manipulation of assets, causing great damage to the whole business, the DAO model is more and more popular around the world most interesting world

This market also opens up many opportunities for users to easily access and benefit, such

as DeFi, NFT ,… DAO appears and is a place for users around the world to experience , financial, improvement ,…

1.5 How does DAO work ?

DAOs, on the other hand, are decentralized, which means they aren’t governed by one person or entity The rules and governance of each DAO is coded in smart contracts

on the blockchain and cannot be changed unless voted upon by the DAO’s members Instead of a select few having the majority of say, members of each DAO can vote on decisions together, typically on equal footing

For example, PleasrDAO members collectively decided to buy the Wu-Tang Clan album After doing so, they created an NFT to represent a deed of ownership to the album The members of PleasrDAO co-own the NFT deed, and in turn, share ownership

of the album

Sometimes, in larger DAOs, teams may form to tackle different aspects of the organization with leaders that have been voted in That way, not every single member is needed to vote on every nuance

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2 DEFI OVERVIEW

2.1 General introduction about DEFI

DeFi is an acronym for Decentralized Finance, roughly translated: Decentralized Finance This is the system by which financial products are available on a public decentralized Blockchain network This means they are open to anyone to use without going through intermediaries like banks or financial institutions

DeFi is an overlapping network of dApps and smart contracts (Smart Contracts) built on the EThereum blockchain This model focuses on financial applications such as lending, exchange, derivatives and trading, etc DeFi can help you easily control your assets as well as being able to trade, lend, invest, and pay

DeFi is considered a financial model that goes against the traditional (CeFi -Centralized Finance) In CeFi, you hand over financial control to an intermediary (bank

or financial institution) and trust that they will do a good job of managing your assets DeFi aims to create a new financial system, democratize the existing system and make it more fair, through the use of open protocols and transparent data

2.2 Some applications of DeFi

Although DeFi is usually placed in the field of Blockchain and cryptocurrency But the scope of application of this model is much broader

Yield Farming: Yield Farming or Yield Farming is a term used to refer to people who try to make more profit from the cryptocurrencies they own In simple terms, if the farmer owns it land, they will lease this land for profit Similar to coin owners, they will lease coins to participate in the buying and selling market to fluctuate the price of a certain coin

Margin Trading: Margin trading or Margin Trading is a term commonly seen in the Forex market In the cryptocurrency market too, you can trade more than you have in the exchange by borrowing from the exchange and have to pay it back when closing the trade

Decentralized exchanges: At decentralized exchanges, you can trade yourself with others without an intermediary to reduce costs Because the exchange does not control your money, even if a hacker can hack the exchange, it will not be able to get the money

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Stablecoins: Without DeFi, it would be more difficult to bring Crypto as collateral to issue Stablecoins because of the need for many intermediaries In contrast, with DeFi, Crypto will be collateralized automatically and quickly by smart contracts

Peer-to-peer lending platform: With a lending model when applying DeFi, without intermediaries As a result, the amount of money that the lender collects will be more, and

at the same time, the interest of the borrower to pay is also less

Prediction market: This is a betting activity applied Smart Contract, you can predict a price movement of a certain cryptocurrency, for example If the prediction is correct, you will have tokens, otherwise, you will lose tokens

Decentralized insurance: Buying insurance for investors participating in decentralized exchanges is also an application of DeFi

2.3 Pros and Cons

Pros

DeFi makes entering the financial markets easier: In DeFi, there is no need for complete trust You do not need to prove your identity or ability to repay the loan The rules of the game are given and the parties must abide by those rules And now, the smart contract is the arbiter to help maintain the rules of the game and ensure the interests of the parties

No need for intermediaries: With blockchain technology behind it, DeFi eliminates intermediaries like banks or the Government Now anyone can access financial products and services without having to be authorized and regulated by these agencies

DeFi pushes crypto prices up: Since DeFi was born, the market capitalization of large projects in the segment has increased significantly The price of some coins has even doubled in less than a year

Increased inclusion of financial services: By making automated tools available to all, with transparent and non-discriminatory implementation

Cons

Scalability, throughput, and transaction fees for blockchain payment platforms are limited The use of energy also raises concerns about contributing to climate change

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Unrecognized legitimacy: DeFi itself or even blockchain technology is still a big question mark today In many countries around the world, blockchain and its products are still not considered legal This means that if there is any dispute, no one will guarantee or settle it for you

Poor liquidity: The current DeFi market is still not as large as traditional financial systems So it can be difficult to put user trust in a sector that is not as profitable as the conventional financial sector

Risk of centralization: Blockchain cannot access information off-chain So there is a need for a third party to provide real-world data to the blockchain, which makes the data centralized and susceptible to centralization-related issues

DeFi attacks, hacks: DeFi projects are vulnerable The reason can be due to misuse of third-party protocols or business logic errors, coding errors, fast lending, price manipulation and miner attacks

2.4 Potential of DEFI:

DeFi has a growing pool of resources over time Within a year, DeFi's total market cap grew 12 times and opened up many opportunities for investors

In the future, DeFi will change and greatly affect the centralized financial model in many countries Many investors are growing tired of the centralization of the traditional financial system They want freedom, freedom and control, especially those who do not have access to banking and finance Therefore, investors will tend to turn to DeFi to manage their personal finances without depending on a third party or other centralized organization

But for DeFi to completely replace CeFi is unlikely due to many subjective as well as objective factors

However, DeFi will certainly create a parallel playing field with CeFi, while focusing on the problems that the CeFi model does not solve

2.5 How does DEFI work ?

Currently, most DeFi protocols and applications are built on top of Ethereum Ethereum is an extension of the technology and concept behind Bitcoin Rather than just

a currency, Ethereum is a global, decentralized network of technology – meaning it is not

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owned or controlled by a central entity – that powers protocols and The application uses smart contracts

Ether is the native cryptocurrency of Ethereum, and like Bitcoin, it can be purchased on a cryptocurrency exchange or mined (for now)

It is important to note that currently, DeFi is largely unregulated and uninsured the way traditional banks are, so investors should do their research and may just want to contribute assets they can afford

In the crypto world, money and DeFi tokens are often referred to interchangeably And while they are quite similar, there are a few important differences

What is DeFi Coin?

Coin DeFi is like a digital version of a fiat currency – it transfers value during financial transactions DeFi coins are built upon and are often named for their unique, native blockchain networks In 2021, Maker, Compound, Uniswap, Aave, Chainlink and Ankr are among the most popular DeFi coins

DeFi tokens also transfer value, but not necessarily always in a financial sense Utility tokens can be used as passwords to provide access to resources, asset tokens can be used

to represent physical assets like real estate and of course there are non-fungible tokens (NFTs) that represent an assortment of “items” such as digital art

(Example: Nyan Cat recently sold for $600,000) DeFi tokens are also different from coins because they can be built on top of existing blockchain networks

DeFi offers:

Much higher degree of autonomy with transactions; Permissions are not required to execute transactions and transactions can be structured without waiting time

Better transparency on transactions and fees

More trust in technology itself instead of intermediaries like banking institutions However, these perks do not come with potential risks DeFi is still new territory, and it's also less private because transactions are displayed on the public decentralized blockchain

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