How to start a successful DeFi project
In the last couple of years, the financial industry has taken a course towards decentralization. Smart contracts are increasingly becoming an alternative to traditional banks, brokers, exchanges, and other financial organizations. 2020 has been a boom for DeFi. According to DeFi Pulse, the dollar value of assets locked into DeFi protocols surpassed $13 billion at the end of 2020, up 2,000% from January.
If in the wake of this popularity, you decide to create your own DeFi product and are looking for answers to questions about how to start a DeFi project, you have come to the right place. In this article, we’ll go over the main stages of DeFi development and the factors to look out for when choosing a development team and launching a product.
Table of contents:
- What is DeFi and what are the benefits of DeFi
- Starting DeFi project
2.1 The process of developing DeFi product
2.2 DeFi security
2.3 Choosing a development team for a DeFi project - IdeaSoft experience
What is DeFi and what are the benefits of DeFi
As you probably know DeFi stands for decentralized finance. What is behind this definition? We can say that DeFi includes financial services and applications implemented using decentralized blockchain architecture. There are all the same investing, trading, lending, borrowing, and other financial platforms, but they work in a slightly different way.
Unlike traditional financial tools that have central authorities, DeFi is built on decentralized networks and enables peer-to-peer (P2P) transactions. This is exactly the advantage of blockchain that has been talked about since the advent of this technology. But in fact, it turned out that this is not so easy to achieve. For example, although cryptocurrencies are decentralized, we still need centralized platforms like crypto exchanges to use them. DeFi allows full decentralization and provides access to more effective financial platforms for a wider audience.
DeFi is built on three pillars, including open source, transparency, and accessibility. This allows everyone to create their own smart contract protocol and become an investor, lender, or borrower without the need to rely on central authorities. In other words, DeFi is intended to become an alternative to traditional financial tools. Plus, DeFi services that exist on the same blockchain platform can be integrated in different ways due to the software compatibility of smart contracts, which allows the creation of entire decentralized financial systems.
Benefits of decentralized finance
- Autonomy. Service users have 100% control over their assets. There is no custodian to manage their assets.
- Transparency. DeFi services are open-source and open to audit. All transaction activities can also be checked.
- Accessibility. There are no restrictions on the use of DeFi products. Regardless of geographic and regulatory factors, anyone can connect a crypto wallet to the decentralized blockchain network and start using it.
- Security. DeFi is powered by blockchain. The information recorded in the blockchain cannot be changed. Therefore, no one can fake your data. Also, the absence of a single point of failure makes the entire system less vulnerable.
- No need for intermediaries. All operations in DeFi are handled through programmable smart contracts. In other words, you run an algorithm that will be executed only if the conditions laid down in the contract are met. Therefore, there is no need to involve third parties to complete transactions.
- Faster and cheaper transactions. Since there are no intermediaries, payments are significantly less expensive, and self-executing smart contracts speed up the processing of transactions.
- Cost-effectiveness. DeFi can be both a cost-cutting way and a new way of investment. DeFi apps users can earn passive income from crypto assets and save on fees for transfers, loans, and deposits.
So, as we see, DeFi has many advantages. Decentralized finance can be the beginning of building more efficient and transparent financial systems that give us more control over our assets. Therefore, it is not surprising that the number of DeFi projects has been growing over the past year. Let’s find out how to start a DeFi project.
Starting a DeFi project
Whichever type of DeFi product you are developing, be it lending/borrowing platforms, crypto exchanges, open marketplaces, issuance apps, etc., you follow a specific development scenario. Let’s take a look at the main stages of creating DeFi products, where to start, and what to pay special attention to.
