DeFi is an open, global financial system designed for the internet era as a replacement for a system that is traditional, tightly managed, and based on decades-old systems and processes. DeFi allows you to have complete control and visibility over your finances.
With DeFi, you can send money, steam money, have access to several stable currencies, borrow funds with or without collateral, lend out funds, earn interest, trade different tokens, buy the insurance and perform several other financial transactions without a third party or a central authority governing the financial processes.
With transparency, security, privacy and accessibility, DeFi applications have processed tens of billions of dollars in cryptocurrency, which keeps growing every day. DeFi provides services without intermediaries by utilizing cryptocurrencies and smart contracts. For example, financial institutions operate as transaction guarantors in today’s financial world.
In DeFi, the financial institution is replaced by a smart contract in the transaction. A smart contract is an Ethereum account that can store money and send or repay it based on specified criteria. When a smart contract is live, no one can change it.
DeFi platforms are open to everyone. They are peer-to-peer and pseudonymous. Also, Smart contracts are used to authorize transactions on these platforms. As of November 2020, fewer than $20 billion was locked in various DeFi solutions, most of which were based on Ethereum.
However, it was valued at $250.55 billion the next year, implying a growth rate of more than 1,000% in a single year.
Top DeFi Platforms
Here are some of the top DeFi platforms where you can carry out financial transactions and still earn.
Injective Hub: For the Injective community, Injective Protocol provides a centralized platform for all things DeFi on Injective, such as staking, governance, and wallets.
Two community-driven goals guide the Injective Protocol.
The first is to allow anyone to access, construct, and trade decentralized finance markets indefinitely. The second is to allow developers to create Ethereum-compatible DApps that are cross-chain utilizing a protocol designed specifically for DeFi.
The injective community is a very strong one, with over 10,000 members on the private discord channel, over 100,000 followers on Twitter and a significant footprint on other social media such as YouTube, Telegram and Reddit.
You can currently earn roughly 9.66% APY with Injective Staking. Staking Injective carries no significant risks. Injective Protocol has several use cases, some of which include:
- Users can host an exchange on the relayer node, which entitles them to 40% of the exchange costs/fees on orders that they supply. Users can also affect the Injective Chain, such as changing the parameters of the futures protocol exchange and upgrading the Protocol.
- Makers pay 0.1%, and takers pay 0.2% on the Injective DEX trading fees. Fee reductions are available to market makers who help bootstrap liquidity on the DEX trading platform.
- The INJ token can be used as a stable coin alternative to offer collateral for margin trading and derivatives trading on Injective’s exchange. In addition, INJ can also be used in specialized futures markets for collateral backing and insurance pool staking, allowing stakers to earn interest on their locked liquidity provider tokens.
Raydium: Raydium is a Solana-based Automated Market Maker (AMM) that provides liquidity with the Serum decentralized exchange. Raydium, as an AMM, facilitates permissionless trading of digital assets such as cryptocurrency through the use of liquidity pools.
Users who contribute liquidity to Raydium are rewarded with RAY, the Raydium ecosystem’s utility coin. RAY can then be staked on the site to gain more cryptos. Some of the use cases of Raydium include;
- Liquidity providers are compensated based on a minor transaction fee on each trade (0.25%). This charge is distributed evenly between liquidity providers (0.22%) and RAY token holders (0.03%). Raydium trading fees are denominated in RAY tokens.
- Staking the Liquidity Provider (LP) tokens earned through staking token pairs to Raydium can be used to generate interest through yield farming. In exchange for farming, you will receive RAY tokens up to 33% of the amount used to farm. These farming rewards provide RAY users with a second passive revenue source through Raydium.
- Users can also stake their RAY tokens in exchange for a return on their investment. Naturally, the longer the tokens are staked, the higher the payout. Currently, the typical return is around 20% APR.
Bancor: Bancor is an Ethereum-based on-chain liquidity protocol that permits automatic, decentralized trade across several blockchains. Instead of swapping virtual currency tokens on cryptocurrency exchanges, the Bancor protocol allows users to convert them directly and quickly.
Bancor is a decentralized financial network that aims to give liquidity to small- and micro-cap coins while also providing a return to liquidity providers. BNT tokens encourage Bancor token holders to participate in trading on the Bancor Network platform.
The most common usage of BNT is for transaction fees. However, Bancor has evolved throughout time to provide BNT holders with various possibilities. Liquidity Providers can earn benefits for providing liquidity to pools, just as other exchanges.
To achieve the best token payout, deposit BNT into the ETH/BNT pool with a cost of 0.10%w. After which, one can participate in its staking rewards. Currently, Bancor Protocol generates up to 60% APR on tokens such as ETH, MATIC, AAVE and more. The Bancor community owns Bancor as a DAO. With over 150,000 followers, Bancor protocol has a very strong community backing.
IDEX: IDEX is the first decentralized cryptocurrency exchange to offer Hybrid Liquidity, which combines a high-performance order book with Automated Market Making (AMM).
With actual limit and stop-loss orders, IDEX allows traders to acquire the best spreads, avoid unsuccessful transactions, and conveniently offer liquidity. The IDEX token aligns incentives between the exchange and IDEX token stakers, which is critical to the exchange’s functioning. Stakers are compensated with half of the trading fees (50% to takers and 50% to makers) if they participate.
Several liquidity pools on the IDEX exchange range from ETH-USDC, SUSHI-USDC, IDEX-ETH, IDEX-USDC, UNI-USDC, and QUICK-ETH. IDEX protocol has a strong community backing of over 100,000 members across several platforms like Discord, Twitter, YouTube and Reddit.
PancakeSwap: PancakeSwap is a decentralized exchange powered by Binance Smart Chain, a quick and low-cost Ethereum alternative. PancakeSwap, like the well-known Uniswap DeFi AMM protocol for Ethereum, allows users to exchange cryptocurrency assets by tapping into user-generated liquidity pools.
Pancake swap enables decentralized exchange, community governance, yield farming and several opportunities for Liquidity providers. Token holders that stake their tokens receive incentives from PancakeSwap.
Farming APY on PancakeSwap is now high across multiple pairs, with farms like DUSK-BNB generating well over 200%. When users stake CAKE, PancakeSwap’s native utility token, they obtain SYRUP in a 1:1 ratio. SYRUP holders are entitled to 25% of the CAKE emissions, divided proportionally among holders.
PancakeSwap Syrup Pools allow users to trade their CAKE tokens for a new token from a Binance Smart Chain project. It works by depositing CAKE token into a syrup pool in exchange for a BEP-20 token from the project.
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