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The Ultimate Guide To DeFi (Decentralized Finance)

The Ultimate Guide To DeFi (Decentralized Finance)

The rapid pace of growth in the online industry is monumental, brings those invested endless ways to keep entertained. Since cryptocurrencies came on the market in 2009, the digital financial world changed forever, paving the way to some exponential possibilities. 

First with Bitcoin, and soon after, a hefty selection joined the race, including offers such as Binance, Ethereum, Litecoin, and many others, broadening the marketing and increasing the industry’s competitiveness. 

With the market taking off and the demand increasing drastically daily, it is n surprise that advances will continue to happen, improving and upgrading the market. The next big step in the market has been the introduction of DeFi (Decentralized Finance). With all this growth that has occurred, it’s becoming almost impossible to ignore the idea of digital assets.

As time goes by and things advance, digital assets have become more and more popular and valuable, dealing users a fresh new hand of possibilities. Blockchain technologies and cryptocurrencies have coupled up to bring the perfect combination of security and anonymity. 

The fact remains that these digital assets are becoming more valuable and impossible to ignore. Blockchain technology coupled with cryptocurrencies are creating new industries, and one of these new industries is decentralized finance or DeFi.

What Is DeFi?

Decentralized Finance or better known as DeFi, is an advancement for the already evolutionary form of finance, which is based on the working of the Blockchain. Although DeFi works on the blockchain system, it isn’t the same as cryptocurrencies such as Bitcoin, Litecoin, and many others but rather follows the same workings as options such as Ethereum. 

Here is a closer look at what is DeFi. DeFi options are digital currency options that do not rely on central finance intermediaries, which include brokerages, exchanges, or banks, but rather utilize the working of smart contracts on blockchains.

The most popular option of a decentralized finance coin is Ethereum, which has managed to rise to fame and be one of the only DeFi options to part in the cryptocurrency scene in a competitive manner, ranking second to the industry titan, Bitcoin. 

DeFi is more than just a cryptocurrency, but rather a way of ‘banking’ and earning financial gain. The platforms that cater to DeFi are another inviting factor to this new trend, allowing people to lend or borrow funds from other fellow users, trade cryptocurrencies, speculate on price, insure against risk, and lastly, earn interest as one would with a savings account. 

With options like these, uses are able to incorporate digital currencies further into their day-to-day practices, making cryptocurrency and DeFi, that much more conducive to the everyday consumer. 

Although Defi and cryptocurrencies are a new way of financial freedom, these investments work the same as any investment in the sense that the bigger the earning usually means the bigger the risk. There is the option of DeFi apps that will offer high interest, but this means that your stability is up for high risk. 

By the end of 2020, over $11 billion was invested in the decentralized finance and cryptocurrency market. Not even six months later, that value had increased more than tenfold, equating to a market value of $20,5 billion in early 2021. This just shows you the value in the market, and if you are looking to make your mark, now is your time. Use what you learned about what is DeFi and get started! 

DeFi: The History and Road To Success 

The industry has been changing and evolving for quite some time now, with the first cryptocurrency hitting the scene in 2009, but since then, the market has skyrocketed, bring those invested many exceptional creations, such as decentralized finance.

MakerDAO is the longest-standing DeFi, launching in 2015, and has been acknowledged as the first DeFi application to receive significant use. MakerDAO allows its users to borrow Dai, which is the platform’s own coin. Dai is a stable coin that has been pegged to the dollar value using the smart contracts on the Ethereum blockchain, which monitors and manages all loan, repayment, and liquidation processes.

When June 2020 rolled around, the DeFi market has grown exponentially, and now Compound Finance, which is an algorithmic, autonomous interest rate protocol built for developers to make open financial applications easier, awards lenders and borrows of crypto with the reward of units of the new cryptocurrency known as COMP token.

With this initiative, other platforms followed suit, creating the new idea of “yield farming” or “liquidity mining.” This is the idea of continuously shifting your cryptocurrency assets from one pool to the next to help increase your maximum returns. 

In July of 2020, the pace picked up even further, and industry experts, such as Bloomberg, stated that DeFi has the dominant hand in the crypto market, holding two-thirds of the market. The cryptocurrency market has caught the attention of many influential people, and with DeFi on the scene, it looks like more cryptocurrency venture capitalists will jump on board. 

Top Ranked DeFi Coins

Are you looking to venture out of the cryptocurrency scenes and get a taste of DeFi? Well, we have a few pointers to get you started on a high note. Here is a list of the top-ranked DeFi coins currently on the market. 

  • Acala (ACA)
  • DerivaDEX (DDX)
  • Swipe (SXP)
  • Sperax (SPA/sCOIN)

DeFi For The Win! 

Now that you know about what is DeFi and how best to get involved, the next step would be to make the first move and get invested. The world of finances is changing and if you are wanting to keep up with how to make the most out of what you got, then be sure to do your research and find out what works for you. With the demand for decentralized finance increasing and growing, this could be the best option for you. 

Last updated by Jen Van Lier on October 5, 2021

About the editor

As website manager, Jen contributes reviews and updates to The Bitcoin Strip on a daily basis. Jen worked in the casino industry for 9 years before focusing on Bitcoin in 2016. She writes on subjects ranging from traditional slots all the way through to unique Bitcoin games, provable fairness and Ethereum smart contract gambling.

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