If you watch the financial markets, you might have heard the words “decentralized finance,” or “DeFi,” pop up frequently. The thriving peer-to-peer crypto network is becoming a standard part of a diverse crypto portfolio, grabbing the attention of consumers and billionaire investors alike. But what is it exactly? And what makes DeFi different from every other sector of crypto that you know?
What is DeFi?
In a financial world that is becoming increasingly digital, DeFi focuses on bringing the convenience of peer-to-peer transactions to investors. By harnessing the efficiency and power of smart contracts — digital contracts that live on the blockchain — DeFi platforms create a space for lending, borrowing, trading, saving, and earning interest that doesn't require all of the usual bureaucracy and minutiae.
✅ The goals of the DeFi network are simple:
🟢 Ditch the paperwork
No paperwork and no wait time through the bank for transactions to clear.
🟢 Cut out the middleman
Automating the contract process on the blockchain eliminates the need for human intervention.
🟢 Pick up the pace
Doing business with DeFi is seamless and fast.
🟢 Equalize the opportunity
DeFi is closing the gap between the individual and the financial oligarchy.
At the beginning of 2019, the TVL of lending platforms (mainly MakerDAO) was USD 270 million. This momentum continued in 2020 as well, to the point where Compound launched its governance token, COMP which kicked off the craze and initiated the first call for liquidity mining.
By Dec 2021, the TVL of DeFi jumped more than1000x, reaching USD 322.41 billion.
The Top 10 DeFi Picks for 2022
1. Curve (CRV) Curve could be a localized stablecoin exchange whose liquidity is managed by an automatic market maker. Curve Finance' governance token is CRV. This protocol enforced a posh time-based staking system to exchange CRV into veCRV, wherever veCRV is a token for governance functions and has the right to claim the cash flows generated by the protocol.
2. MakerDAO (MKR) With Maker, users will lock-in collateral as collateral for loans in exchange for Dai. The Maker Foundation supported it in 2015 as an ASCII text file project to supply economic freedom and chance to anyone, Anywhere. Towards the tip of 2017, Maker launched its 1st stablecoin, the one Collateral Dai (SAI), that used Ether (ETH) as collateral.
3. AAVE (AAVE) With AAVE, an Ethereum token, users will participate in an exceedingly non-custodial localized cash market. In exchange for paying a variable interest rate, deposits give liquidity to the market, whereas borrowers can borrow cryptocurrencies.
4. WBTC (WBTC) Wrapped Bitcoin (WBTC) could be a tokenized version of Bitcoin (BTC), which runs on the Ethereum blockchain (ETH). WBTC is compatible with ERC-20 - the essential compatibility customary of the Ethereum blockchain - facultative it to be totally integrated with the latter' system of localized exchanges, crypto loaning services, prediction markets, and different DEFI-enabled decentralized applications.
5. Convex simplifies the Curve boosting experience to maximize yields. With Convex, Curve liquidity providers can earn trading fees and claim boosted CRV without locking CRV themselves. Offering liquidity rewards and boosted CRV is easy for liquidity providers.
Convex allows users to stake CRV as well as receive trading fees and a portion of boosted CRV received by liquidity providers. It improves the balance between liquidity providers and CRV stakeholders as well as capital efficiency.
6. Uniswap (UNI) UniSwap could be a localized exchange (DEX) that lets users swap ERC-20 tokens while not an intermediary. commerce tokens on a DEX avoids the danger of centralized exchanges and storing tokens on any exchange. A market maker (AMM) provides liquidity to traders via token deposits into the sensible Contract via Liquidity suppliers (LP). The protocol compensates liquidity providers with a 0.3% trading fee.
7. Compound (COMP) Users of Compound will lend or borrow elect cryptocurrencies on a decentralized blockchain. As a result, it sets interest rates supported provide and demand of assets by pooling assets. The users of Compound are ready to deposit their crypto assets to Compound and that they will be collective into a liquidity pool. when users deposit, they'll receive cTokens in return. By holding the cTokens, users will earn interest.
8. PancakeSwap (CAKE) steam-powered by Binance sensible Chain (BSC), PancakeSwap could be a localized exchange. this is often the biggest AMM-based exchange on BSC. Binance sensible Chain has abundant lower dealing fees than Ethereum. CAKE is the governance token for PancakeSwap.
9. (LDO) Defi 2.0 The recreation facility staking resolution works with Ethereum (ETH). Users will stake ETH whereas circumventing quality protection requirements. In preparation for ETH 2.0, users' ETH funds are presently fast and can stay so till the new mainnet is launched. As ETH2.0 is seeing regular unleash date pushbacks, this dealing release might take years. With customary ETH2.0 staking, users can solely stake in multiples of thirty two (ETH). In lightweight of current prices, $150,000 USD is that the minimum stake amount. Lido eliminates this barrier.
10. Abracadabra (SPELL) Defi 2.0 - Abracadabra Money utilizes interest-bearing tokens (ibTKNs) like yvWETH, yvUSDC, yvYFI, yvUSDT, etc. as collateral to borrow MIM (M agic Internet Money) that is USD-pegged. MIM works like any other stablecoin. Tokens bearing interest have been introduced by Abracadabra Money. Previously, they sat idle. Abracadabra Money lets users leverage their funds at minimal risk to reach the next threshold, opening up a variety of additional models and possibilities. There are two main tokens in the Abracadabra Money ecosystem:
SPELL serves as the governance token.
MIM is the core component to sustain Abracadabra Money’s lending model.