Updated: Jun 6
DeFi adoption via dApps and services
There is no question that Decentralized Finance (DeFi) is gaining traction in the blockchain sphere. While the concept has been around as long as Bitcoin, it only reached mainstream popularity in 2020. Today, its unstoppable progress can be seen in a multitude of DeFi applications (dApps) that take away the intermediaries, along with most of the downsides of traditional financing.
You can find DeFi in derivatives, insurance, decentralized autonomous organization (DAO), decentralized exchange (Dex), lending and borrowing, NFTs, and so much more. A key differentiator and feature of DeFi is disintermediation.
By removing the middleman that is common in traditional financial institutions such as banks, financing in the DeFi world becomes more transparent, economical, and convenient.
Types of DeFi applications (dApps) and solutions
There are many dApps today that exist as an alternative or an extension to traditional financing models. The basic concepts remain the same for easier adoption to a beginner in crypto but with arguably stronger selling points.
Here are some of the dApps you should know to leverage your crypto holdings:
Derivatives Derivatives are financial products that get their value from an underlying asset. The most common derivatives are your futures, options, and swaps. Futures allow you to buy or sell your crypto with another entity on a given date at a given price, irrelevant of the market price during the time of the execution. Options are like futures, but you are not required to buy or sell the asset; you simply have the option. Swaps also allow you to bet on the future price of an asset, but you can keep your position indefinitely.
Staking Staking is one of the easier investment choices to understand and enter as a beginner in crypto. It allows you to “lend” your cryptocurrency to a DeFi platform, such as Compound. The platform will use your crypto for its activities and in return, you are rewarded with more cryptocurrency. It can be a source of passive income because most platforms have an automatic compounding function that allows you to just stake your coins and earn while sleeping.
Decentralized Exchange If you’re already a trader in centralized exchanges (CEx) such as Binance, a decentralized exchange (DEx) will be a breeze for you. A DEx will allow you to own your coins and be free from hacks and thefts that exist in a CEx. You have the power of anonymity in DEx.
Stablecoins Stablecoins such as Dai, USDT, and USDC are DeFi assets or digital money that are pegged to the value of fiat or cash. This means 1 USDC is equal to 1 US dollar. Traders and investors usually keep stablecoins in their wallets and use them to efficiently and quickly buy other cryptocurrencies when the market is ripe.
Decentralized Autonomous Organizations (DAO) Decentralized Autonomous Organizations (DAO) were created as an overseeing body with members who vote on rules to govern DeFi protocols using tokens. One famous DAO is the MakerDAO, which issues the Dai stablecoin. A DAO community can suggest changes to a protocol and let voting decide the future of a project.
As DeFi continues to penetrate the mainstream blockchain industry, dApps continue to rise to the challenge of providing a better extension of traditional financial products. AlgoBlocks is one of the newer platforms with a vision to improve the DeFi space by providing access to DeFi products with automated pre-programmed templates.
Find out more about the AlgoBlocks roadmap to see the future of DeFi, including trading, staking, and an all-in-one dashboard built on a robust architecture.
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