DeFi, an abbreviation for “decentralized finance,” is a term used to describe the growing market of financial applications built on top of blockchain technology. DeFi refers to a wide range of decentralized applications covering everything from lending and borrowing to trading and saving.
Some of these projects have already been launched, while others are still being developed. However, several popular ones have become household names in the cryptocurrency space.
The following four DeFi cryptos are some of the most popular and therefore deserve your attention and research:
Terra (LUNA)
Terra is a decentralized payment network with stable coins pegged to currencies like the dollar or Korean won. The Terra protocol works as an open market for stablecoins, where you can buy and sell at any price you want. It does this by creating incentives for users who wish to expand its reach into new markets, such as China or Africa. The more people use the currency, the higher its value, which incentivizes businesses to accept it as a form of payment instead of fiat currencies like dollars or euros. This creates an expanding network effect where each user adds value locally and globally!
Terra’s stable coins are designed to be pegged to real-world currencies. They are backed by collateralized debt positions (CDP) and an elastic supply mechanism. This means that more LUNA will be minted when demand increases, and when demand decreases, the excess tokens will be burned.
Aave (AAVE)
Aave is a lending platform that uses smart contracts for collateralized lending. Users can deposit their cryptocurrencies into a lending pool which acts as collateral for other users to borrow against. Depositors earn interest from this process while borrowers pay interest.
The protocol enables users to deposit cryptocurrencies into an Aave market and earn interest, borrow against it, or convert it into another cryptocurrency without selling it on an exchange.
Chainlink
Chainlink is a decentralized oracle network that aims to connect smart contracts with data from the real world. It does this by allowing those who provide data to connect to the Chainlink network, where smart contracts can request that data through oracles.
Chainlink’s decentralized model is unique because it requires multiple oracles to sign off on any data point. This model provides a high level of accuracy and security to smart contracts. Many new projects are coming out, and there is no doubt they will be used by more and more of them. If decentralized finance becomes mainstream, Chainlink will benefit from it.
Clover Finance (CLV)
Clover Finance (CLV) is a decentralized finance (DeFi) project that facilitates efficient trading using continuous liquidity pools (CLPs). CLPs are similar to automated market makers (AMMs), but they only support one token pair. Instead of a bidding system, CLPs use constant function market makers (CFMMs), which allow users to buy and sell tokens at constant prices while still facilitating efficient trading.
It’s a project that provides financial services on top of Ethereum, like loans, staking, and derivatives. They are backed by one of the most significant crypto funds in Asia. They have a big partnership with the biggest DeFi protocol on BSC (Binance Smart Chain) PancakeSwap. They have over $10M locked value in their ecosystem.
