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In this slide, we look into blockchain and DeFi, which is the background knowledge for understanding Olympus DAO.
In a blockchain platform, the nodes store and share blocks containing various transactions such as transmission and exchange, and they are rewarded for mining new blocks. The blockchain platform adds new blocks by achieving consensus among nodes through a consensus algorithm such as Proof of Work (PoW) or Proof of Stake (PoS).
DeFi is a blockchain-based decentralized financial system that uses cryptocurrency.
For example, in a secured loan service, a centralized organization determines important matters such as the interest rate of a loan and the amount that can be borrowed in traditional financial systems, whereas in DeFi, the loan interest rate is set transparently by supply and demand on the blockchain. Users can borrow as much as they want with their cryptocurrency as collateral. At this time, the collateral is stored in the smart contract, and if the value of the collateralized cryptocurrency is lower than the value of the loan, the smart contract sells it to the market and repays the loan amount. In this case, the safety of the loan service is supported by the secured cryptocurrency of the borrower and the smart contract technology.
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IEEE/ICACT20230040 Slide.04
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