DeFi has been causing a stir in the crypto market lately. It is considered to be the next evolution of traditional financing. DeFi includes crypto exchanges, decentralized wallets and their various blockchains. It has received tremendous support from the community and has also helped in innovations in the world of cryptocurrency. Let’s talk more about it to know what DeFi actually is, what Defi tokens are and their uses, and the top 5 best DeFi tokens to watch in 2022.
Also read | Bitcoin ETFs: How It Works, How To Buy In India, Benefits & MoreWhat are DeFi and DeFi Tokens?
DeFi (Decentralized Finance) is a model of digital finance based on the Ethereum blockchain and unlike banks and other financial institutions, it is not centralized. This means that DeFi aims to eliminate the middleman such as banks or brokers and put a seller in direct contact with the potential crypto buyer, saving additional brokerage costs.
It provides a network that enables a fast, secure, transparent and fully digital financing model. And with the help of smart contracts on Ethereum, you can stake your crypto for interest. Smart contracts are programs that run automatically when a predefined condition is met.
DeFi uses decentralized apps (Dapps) and decentralized exchanges (DEX) to offer financial services such as cryptocurrency trading, exchange, lending to earn interest, staking, lending cash on cryptocurrencies, bartering and selling. These apps are called DeFi Tokens.
DeFi tokens are the currency of several Dapps. It is used as compensation and payment to their miners for validating transactions or records. It can also be used to trade and trade with other Ethereum-based tokens on crypto exchanges. DeFi tokens and strive for a faster transaction method, charging no more than 1% transaction fee.
Also read | Simple steps to convert Bitcoin and other cryptocurrencies into cashBest DeFi Exchanges
DeFi exchanges are platforms that allow you to buy cryptocurrencies from them. They prioritize privacy and generally trade in DeFi tokens, well-known cryptocurrencies such as Bitcoin or NFTs. But you cannot buy crypto with cash on these platforms. You need a decentralized wallet to add or withdraw funds from these exchanges. To learn how to buy crypto on DeFi exchanges, read this article.Paxful
- Trusted and Known Decentralized Exchange
- Buy Crypto from Gift Cards
- No KYC details and ID required
Paxful is a decentralized exchange that allows you to buy Bitcoin, Ethereum and other well-known cryptocurrencies in exchange for gift cards. You can buy these gift cards from Amazon or other sites and exchange them for cryptocurrencies of the same value. With Paxful you can communicate directly with the buyer while your identity remains anonymous and the platform does not ask for identity information.open sea
- Largest Ethereum-based NFT Trading Platform
- Host tons of popular and well-known NFTs
- Reliable and secure platform
OpenSea is one of the largest and best known decentralized NFT platforms for buying and selling NFTs. These are some of the most popular and attractive NFTs on the market. OpenSea mainly trades on Ether tokens and allows users to create their NFT for free. To buy NFT on OpenSea, you need to have pre-existing funds in a decentralized wallet like MetaMask.
Related article | Create and sell your own NFT in 3 easy steps
- Pier to Pier crypto exchange application
- A simple and easy to navigate user interface
- Allows multiple methods to buy and trade cryptocurrency
OpenBazar is an application that must be installed on your system before use. It allows you to buy and sell your crypto directly from the other person. It accepts more than 50 cryptos. You can use different methods to buy crypto on this platform such as Zcash (Privacy-Focused Coin), Bitcoin Escrow, and Instant Payments when both parties are online.Top 5 Best DeFi Tokens to Invest in 2022Terra (LUNA)
- It is an algorithmic stablecoin
- Terra is a blockchain that supports its Dapps
- Terra’s value is less volatile compared to other tokens
Terra has its blockchain ecosystem. It has the highest market cap as of the writing of this article. LUNA is the cryptocurrency of Terra blockchain as Ether is for Ethereum. Terra acts as an algorithmic stablecoin. So unlike Bitcoin, its value does not change all the time and remains comparable to 1 USD. Even if the value of Terra falls below 1 Dollar, it will be compensated by LUNA. This gives investors a reason to hold it and in turn increase its value.Avalanche (AVAX)
- It is a crypto loan lending platform
- You can earn interest on your borrowed crypto assets
- It has the second largest market cap in DeFi token
Avalanche is a crypto-based lending service that allows you to liquidate your crypto assets without selling them. It is based on an open-source DeFi system and the thing that this lending platform emphasizes is that it allows you to earn interest on your crypto assets while also allowing you to borrow them. It has several borrowing features and has a lot of potential going forward.Uni swap (UNI)
- Trusted Decentralized Crypto Exchange
- Used SMP system to provide sufficient liquidity for tokens
- UNI allows traders to trade tokens without centralized exchanges
Uniswap is a decentralized crypto exchange that also has its DeFi token UNI. Uniswap only hosts ERC 20 Ethereum based tokens and allows users to easily exchange their Ethereum tokens for others. It uses Automated Market Maker (AMM) to ensure that the tokens on its platform always have sufficient liquidity. It also has its own wallet.Chain Link (LINK)
- Helps securely transfer data from the real world to the blockchain
- Creates a tamper-resistant connection to validate smart contracts
- Acts as a trusted source for data validation and transfer
Chainlink is a type of network that enables a secure connection between blockchain and off-chain data. It is a decentralized oracle network that connects real-world data to the blockchain. This data is retrieved with network nodes and validated to run smart contracts. Node operators are paid by Chainlinks native cryptocurrency LINK. It has a market capitalization of more than $8 billion.Dai (DAI)
- Value is not volatile
- Based on MakerDAO protocol
- It is backed by a mix of different cryptocurrencies
The DAI is similar to Terra in that its value is soft-pegged to USD. It is a great option for those who want a stablecoin without a lot of volatility. It is also the first token of its kind to be collaterally supported. DAI is based on MakerDAO Protocol, software used to create smart contracts. The value of DAI is also backed by a mix of different cryptos and its market cap is $6 billion as of the writing of this article.To block
We have covered a lot in this article. From defining DeFi and DeFi token to 5 best DeFi tokens to invest in 2022. We hope you have gained a better understanding of all the concepts discussed here and how they work. DeFi is still evolving and we expect it to branch out more in 2022.
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