New and exciting DeFi projects are being launched every day. This article will discuss 5 Decentralized Finance projects that could change the world in 2023.
As more and more people learn about the benefits of decentralized finance, it is said that Defi is the bright future of the cryptocurrency business. The DeFi space is growing very quickly.
Decentralized finance (DeFi) is a new way to organize and make possible trades, exchanges, and financial services based on cryptocurrencies.
The main idea behind DeFi is that no one in charge can tell or direct how things work.
In the cryptocurrency markets, this is a different way of doing things than the standard models of finance for fiat currency or centralized finance (CeFi).
In centralized models, a central authority influences and controls the flow of deals. Most of the time, the main body is also in charge of keeping assets safe.
With DeFi, there is only one person in charge. Instead, power is spread out in a way called “decentralization,” which gives each person more power and control.
In the DeFi model, all buying, selling, loans, and payments can be made with cryptocurrency without a central authority. This is called a peer-to-peer (P2P) method.
Keeping track of assets is a vital part of any financial plan. In DeFi, private cryptographic encryption keys that make it possible to store cryptocurrency assets are in the hands of individual dealers.
Smart contracts, often allowed on Ethereum-based blockchains, make financial transactions possible in the DeFi model. Many projects are great places to put money.
The concept of decentralized exchanges (DEXs) is also a part of the DeFi paradigm, intending to connect and empower anyone who wishes to conduct Bitcoin transactions.
DeFi is also frequently linked to the idea of decentralized applications (dApps), especially in the context of financial services.
How does DeFi work?
DeFi uses a blockchain, which is often based on Ethereum.
A blockchain is a distributed ledger that can’t be changed and uses cryptography to protect entries.
These entries are used to record events. Blockchains are also the base for cryptocurrencies, which are digital tokens with value that are made in a blockchain.
The DeFi model works with the help of smart contracts on a blockchain based on Ethereum.
A smart contract is an app that runs on a blockchain and uses the spread ledger and cryptographic encryption features that come with it.
The smart contract spells out the rules for carrying out a particular action.
Instead of a single authority making a transaction possible, a smart contract is programmed to make the financial transaction in the contract happen.
A smart contract can store cryptocurrency assets sent from one organization to another.
With DeFi smart contracts, the terms and conditions of a transaction are also clear and available as code.
This means that others can look at them and audit and study them. Since DeFi is a P2P system, there is no need for a central body to make a smart contract work.
So, if two peers agree to do a deal together, it can be done without a third-party central authority.
The DeFi approach and its use of smart contracts focus on giving the user more control.
You must have private and public encryption keys to keep track of cryptocurrency assets. With the decentralized method, everyone controls their secret encryption keys.
DeFi Projects that Could Change the World
As more and more people learn about the benefits of decentralized finance, it is said that Defi is the bright future of the cryptocurrency business.
The DeFi space is growing rapidly, and many projects are great places to invest.
Some DeFi projects that could change the world in 2023 include;
- Chainlink (LINk)
- Aave (AAVE)
- Fantom (FTM)
- Uniswap (UNI)
- Compound (COMP)
Chainlink (LINK)
To connect with various data types, many dApps in the crypto realm require oracles. Chainlink is the current market leader in terms of oracles.
Chainlink bridges the gap between traditional databases and blockchain applications by delivering a decentralized data set via oracles and smart contracts.
Chainlink has expanded rapidly since the beginning of 2019, and it now powers more than 300 smart contracts and distributed applications with over 75 pricing feeds.
The development and maturation of Chainlink as a project to the point where it awards funds to crypto ventures is noteworthy.
Chainlink contributes notably to the DeFi ecosystem by providing oracles to other projects. Therefore, Chainlink deserves to be mentioned as one of the best DeFi crypto projects.
Notable projects that have made use of Chainlink oracles include Synthetic, AAVE, and KyberSwap.
Tokens for the LINK protocol have already been created. Thus, the Maximum Supply corresponds to the Total Supply.
Aave (AAVE)
Aave is another decentralized finance site where people can borrow different types of cryptocurrencies.
Smart contracts made possible by a pool of cryptocurrencies allow people to lend money to each other on the site. People want to borrow money or give cryptocurrency in exchange for interest payments.
The Ethereum blockchain is used to build Aave. The contract manages all the smart contract’s assets, so users depend on algorithms and computer networks running Aave to handle deals.
You no longer have to trust or pay banks or other financial companies to care for your money.
The goal of Aave is to make basic financial services easier to get. This means you can give and borrow money without the help of banks, brokers, or other intermediaries.
Overall, you’re engaging in technology and helping to shape its future.
AAVE is the Aave protocol’s original governance token. Buying AAVE coins is like buying stock in a company.
So, you can vote on ideas for improving the system, which could change how it works. The AAVE token is built on the ERC20 standard and is made to deflate as a critical security feature of the Aave Protocol.
Fantom (FTM)
FANTOM is a platform for smart contracts that uses a directed acyclic graph consensus mechanism to offer DeFi services to programmers.
The comprehensive staking incentive structure and in-built DeFi tools provided by the go-to-market platform make it easy to integrate pre-existing dApps.
The DeFi Smart Contracts and associated services are compatible with the Lachesis blockchain, which operates at Layer 1.
Fantom’s Opera is a smart contract chain compatible with the EVM, but the Fantom ecosystem protects all layers.
The project’s overarching goal is “to provide compatibility between all trading authorities worldwide.”
Without the necessity for a central authority, Fantom plays a crucial role in decentralized financial transactions.
aBFT (Asynchronous Byzantine Fault Tolerant) is the POS consensus mechanism that ties the entire system together. This means it can keep the whole network running smoothly.
Because of its high throughput and speed, Fantom is utilized for financial transactions. It’s also great for running governance and operational protocols on the blockchain.
This means token holders on the FTM network will have a voice in the network’s governance and can vote on proposed modifications, make suggestions, and ultimately make choices.
How much sway you wield will be proportional to your FTM.
Uniswap (UNI)
Most people know Uniswap as the leader in the crypto DEX space right now. It is a decentralized market that runs on the Ethereum network. Hayden Adams started it in 2017.
The trading system is designed to be an automated on-chain market maker (AMM) that can determine a cryptocurrency’s price based on the ratio of two cryptocurrencies in a pool.
On Uniswap, you can trade and sell both DeFi tokens and Liquidity Provider tokens. Even if an ERC20 coin isn’t on the list, you can still make a pair and exchange it for another cryptocurrency if you know the smart contract’s address.
Aside from trades, users can also offer liquidity in existing pools or make new pools to provide liquidity.
As ERC20 tokens, UNI tokens were held before they were used for the first time. UNI has a 4-year term that gives 40% of the company to the team, workers, investors, and advisors.
This term ends in 2024. After that, the inflation rate for UNI will always be 2%.
Compound (COMP)
One of the most well-known DeFi protocols, Compound allows users to earn interest on their cryptocurrency holdings by depositing them in a liquidity pool.
To compensate for their services, liquidity providers are issued cTokens (for ETH – cETH), which they can subsequently redeem for ETH and earn interest on.
Loans of 50-75% of the value of the collateralized cryptocurrency are possible thanks to this system.
The platform’s native token, COMP, is a governance token that can be used to suggest, discuss, and vote on modifications to the protocol.
Although mining is impossible for COMP coins, the Compound Labs team creates 1273 new tokens daily, splitting them evenly amongst borrowers and lenders.
In addition, the founders’ and employees’ 22.26% allocation has a 4-year vesting term.
Summary
Decentralized Finance (DeFi) is a new and growing frontier of investment possibilities. It brings accessibility, inclusion, security, transparency, and new financial products that have never been seen before.
To make sound investment decisions in the DeFi world, studying and keeping up with the changing market is essential.
