Top 5 Defi Categories to watch out in this Altcoin Season
Decentralized finance is becoming more and more acceptable within the mainstream business circles, thanks to the global awareness of Bitcoin which paved the path for blockchain technology. More and more people are interested to learn what else can decentralized networking offer which explains the volume of investments in blockchain development.
After Bitcoin made its appearance other cryptocurrency options followed the path but not as one of them as nearly made an impact like Ethereum. Buterin’s blockchain platform allows seamless software development and holds a decisive second place in market share. This means that each of the five categories presented in this article represents blockchain applications that you can create with the Ethereum platform.
DEX or Decentralized exchanges
The cryptocurrency market is growing in volume and raised a few eyebrows, so now governments look for methods to get an oversight of the Bitcoin market. Consequently, users turned to decentralized cryptocurrency exchange because that removes the middleman and keeps privacy undisrupted. These types of technology work by providing a direct, peer-to-peer exchange. In practice DEX allows us to reduce transaction fees as well.
Since we see a rise in cryptocurrency trade this year, it’s safe to assume that more and more people will become aware of DEX and move their assets away from prying eyes. The software is not as user-friendly like with centralized exchange apps, but you don’t have to create a user account or provide any personal information. All you need is a wallet.
Examples: Uniswap, SushiSwap & Venus.
Cryptocurrency lending platforms
This decentralized financing technology allows seamless and private cryptocurrency loans. There are two sides to the loan transaction process. A stakeholder is a user who deposits a certain number of Bitcoins or some other crypto for a given period. During that time, other users are free to loan available sums from the deposit and pay interest until they cover their entire loan.
One of the main advantages for users is that borrowers don’t have to provide personal info or banking data, all it takes is collateral set by the platform based on the desired amount. As for lenders, there are attractive interest rates without the need to share any data with anyone.
Examples: Maker, AAVE & Compound.
Cryptocurrency prices are extremely volatile, Bitcoin can lose $5000 of its value within a day, and that’s a lot of money to lose in a day. With the development of Stablecoins, there was a new way of securing the safety of DeFi investments. A cryptocurrency owner can peg the value of its asset to some other, more stable, like the U.S. Dollar or some other fiat currency, even gold.
The goal is to stabilize the price of your property when the market situation seems extremely unpredictable and you have a doubt that you might be at risk of losing too much money. Knotting the price of the cryptocurrency to an asset with a stable price benefits loaner because it secures the worth of the loan in the long term. All over the world, banks are taking a more lenient position towards accepting the existing Stablecoins providers very few are immune to the up-and-coming DeFi trend.
Examples: Dai, Frax, & Ampleforth.
Smart contracts are widely used because they automate the transaction process as soon as the terms of the agreement are met. Smart contracts are actually in the center of every DeFi category, including derivatives, which we’ll about to explain.
Derivative instruments, or derivatives for short, are specific types of smart contracts that tie their value to a certain asset. This allows both sides of the contract to secure that the execution takes place only at previously agreed parameters. Some forms of derivative contracts even allow betting on Bitcoin price without even owning any BTC.
Examples: Synthetix, Nexus Mutual, & Hegic
Allowing users to seamlessly create any kind of insurance policy and set up the terms of execution. The main attraction of crypto insurance policy is the high level of automation. Thanks to big data, neither side has to fill out endless forms, wait out claim processing, or get lost in the endless bureaucracy. Digital leger activates the insurance policy the moment all conditions are met.
Examples: Cover Protocol, Bridge Mutual.
These were the top five Defi categories to watch for this season. The blockchain industry is making progress by the day, new apps are being developed and old technology gets better. If you plan to invest in Defi, let this article serve you as a starting point for deeper research.
Jennifer Holland is a professional writer with 3 years of experience at Bestessay.com writing about education, student life, and college essay papers for several years. She helps students reach their dream job by offering them her experience as a freelance essay writer and constant job seeker.
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