During the current bullish cycle, there has been one sector in the cryptocurrency industry that has been spearheading the entire market – decentralized finance (DeFi).
Investors from all sides of the world are rushing to DeFi because of the freedom and profit potential it provides. Suddenly, countries with little to no access to any financial yield products have a wide array of options to choose from.
In this article, we take a look at the advantages DeFi brings and we list some of the best tokens in this space that can help you earn some profits.
What is DeFi and what are its advantages?
DeFi stands for decentralized finance. This smart contract-powered sector of the crypto industry aims to complement, if not replace, traditional financial products such as lending, borrowing, trading crypto, etc.
DeFi platforms provide all of the aforementioned services, but in contrast to traditional services, there are no banks, brokers, or centralized exchanges that act as a middleman.
This is a pure peer-to-peer space, where individuals can trade, lend and borrow from each other with the help of smart contracts, directly with one another. For instance, crypto holders can provide liquidity to these platforms and earn a great amount of money through interests. At the same time, other users can borrow these funds, and get quick access to a credit line.
The biggest advantage of DeFi is that it’s permissionless. Anyone with an internet connection can access this space and start investing right away.
Best DeFi tokens
In this next section, we take a look at some of the best DeFi tokens that can yield considerable profits.
Aave is a decentralized financial platform that allows people to lend and borrow crypto. The way it functions is fairly simple.
Lenders deposit their funds in smart contracts commonly referred to as “liquidity pools”. Borrowers can borrow these funds and pay interest for the service provided. The lenders receive these interests as a reward for providing liquidity to the protocol.
The AAVE token is the native crypto of the platform and can be used to get discounts for using the services of the platform, as well as be used as a governance token to have a say in the further developments of the protocol.
Uniswap is the largest and most popular decentralized crypto exchange (DEX) on the market. It is an automated market maker (AMM) protocol that automatically matches buy and sell orders of the users using smart contracts.
It allows users to swap one token for another without having to go through an intermediary. So instead of having to deposit your coins to a centralized exchange, you can swap them directly with your cryptocurrency wallet connected to the exchange.
The UNI cryptocurrency is used for the governance of the network.
Synthetix is a DeFi protocol that allows for the creation and exchange of crypto and non-crypto assets. These non-crypto assets can be anything – traditional currencies, stock indexes, commodities, even bitcoin options contracts like those on Bitlevex.
To create these “synthetic” assets. SNX tokens are used as collateral. So, whenever a synthetic asset is issued on the platform, the required number of SNX tokens will be locked in a smart contract.
Furthermore, users can stake SNX tokes to secure the network and receive a portion of the transaction fees as a reward.
In this article, we talked about the importance and advantages of DeFi. Additionally, we shared a list of the top 3 DeFi tokens to keep an eye on in the near future. The adoption of decentralized finance is increasing by the day, and these tokens might have a bright future in this niche industry.