DeFi has recently caused a stir in the crypto market. This is thought to be the next evolution of traditional finance. DeFi includes crypto exchange, decentralized wallets, and their various blockchains. He has received tremendous community support and has also helped innovate in the world of cryptocurrencies. Let’s talk about it more to find out what DeFi really is, what Defi tokens are and how to use them, and the 5 best DeFi tokens to watch in 2022.
What are DeFi and DeFi tokens?
DeFi (decentralized finance) is a digital finance model based on Ethereum blockchain and unlike banks and other financial institutions, it is not centralized. This means that DeFi aims to eliminate intermediaries such as banks or brokers and directly link the seller to a potential buyer of cryptocurrencies, thus 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, it allows you to invest your cryptocurrency for interest. Smart contracts are programs that run automatically when a predetermined condition is met.
DeFi uses decentralized applications (Dapps) and decentralized stock exchangesDEX) offer financial services such as cryptocurrency trading, exchange, interest borrowing, investing, borrowing cash on a crypto, replacement and sale. These applications are called DeFi tokens.
DeFi tokens are the currency of various Dapps. It is used as a fee and payment to their miners to validate transactions or bills. It can also be used to trade and exchange with other Ethereum-based tokens on crypto exchanges. DeFi tokens and their goal is to provide a faster method of transaction with a charge of no more than 1% transaction fee.
The best DeFi exchanges
DeFi exchanges are platforms that allow you to buy cryptocurrencies from them. They give priority to privacy and generally trade DeFi tokens, well known crypto like Bitcoin or NFTs. But you can’t buy cryptocurrencies in cash on these platforms. You will need a decentralized wallet to add or withdraw funds from these exchanges. To learn how to buy cryptocurrencies on DeFi exchanges, you can check this article.
- Reliable and well-known decentralized exchange
- Buy cryptocurrencies with gift cards
- KYC data and proof of identity are not 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. Paxful allows you to interact directly with the customer as long as your identity remains anonymous and the platform does not ask for any identity information.
- The largest NFT trading platform based on Ethereum
- It hosts a number of popular and well-known NFTs
- Reliable and secure platform
OpenSea is one of the largest and most well-known decentralized NFT platforms to buy and sell 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 own NFT for free. To buy NFT on OpenSea, you must have pre-existing funds in a decentralized wallet such as MetaMask.
Related article How to create and sell your own NFT in 3 easy steps
- Pier to Pier cryptocurrency exchange application
- Simple and easy to navigate user interface
- It provides multiple methods for buying and trading cryptocurrencies
OpenBazar is an application that must be installed on your system before use. It allows you to buy and sell your cryptocurrency directly from another person. It accepts more than 50 cryptocurrencies. You can use different methods to buy cryptocurrencies on this platform such as Zcash (privacy-focused coin), Bitcoin Escrow and direct payments when both parties are online.
Top 5 best DeFi tokens to invest in 2022
- It is algorithmic stablecoin
- Terra is a blockchain that supports its Dapps
- The value of Terra is less variable compared to other tokens
Terra has its own blockchain ecosystem. It has the largest market capitalization at the time of writing. MOON is a cryptocurrency of the Terra blockchain such as Ether for Ethereum. Terra acts as an algorithmic stablecoin. So, unlike Bitcoin, its value does not change all the time and remains similar to 1 USD. Even if the value of Terra decreases by 1 dollar, then it is compensated by the MOON. This gives investors a reason to keep it and in turn increase its value.
- It is a platform for borrowing crypto loans
- You can earn interest on your borrowed crypto assets
- It has the second largest market capitalization in the DeFi token
Avalanche is a crypto-loan-based loan service that allows you to liquidate your crypto assets without selling them. It is based on the open source DeFi system, and the thing that highlights this lending platform is that it allows you to earn interest on your crypto assets while allowing you to borrow them. It has several lending features and has a lot of potential in the future.
- Reliable decentralized crypto exchange
- It uses the AMM system to provide sufficient liquidity for tokens
- UNI allows traders to exchange tokens without a centralized exchange
Uniswap is a decentralized crypto exchange that also has its own DeFi token UNI. Uniswap only hosts ERC 20 Ethereum-based tokens and allows its users to easily exchange their Ethereum tokens for others. It is used Automated Market Maker (AMM) to ensure that tokens on your platform always have enough liquidity. He also has his own private wallet.
- Helps securely transfer real-world data to the blockchain
- Creates a link to validate smart contracts
- It acts as a reliable source of validation and data transfer
Chainlink is a type of network that provides a secure connection between blockchain and off-chain data. It is a decentralized network of oracles that connects real-world data to the blockchain. This data is retrieved by network nodes and checked for the execution of smart contracts. Node operators are paid by Chainlinks in the original cryptocurrency CONNECTION. It has a market capitalization of over $ 8 billion.
- The value is not variable
- Based on the MakerDAO protocol
- It is supported by a mix of different cryptocurrencies
DAI is similar to Terri because its value is softly pegged to the USD. This is a great option for those who want a stable coin without high volatility. It is also the first token of its kind to have collateral support. DAI is based on MakerDAO protocol which is the software used to create smart contracts. The value of DAI is also supported by a mix of different cryptocurrencies, and its market capitalization is $ 6 billion since the writing of this article.
We have covered a lot in this article. From defining DeFi and DeFi tokens to the 5 best DeFi tokens to invest in 2022. We hope you have a better understanding of all the concepts discussed here and how they work. DeFi is still evolving and we expect it to expand more in 2022.
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