The sudden surge in the crypto market has taken the world by storm. Another rising technology that has interested crypto investors and enthusiasts across the globe is DeFi (Decentralized finance). Looking for the top 5 DeFi tokens to invest in, in 2021? Before that, let’s understand what DeFi is?
What is DeFi? Well, it is a big umbrella under which lies various financial applications that are pushed and geared by blockchain. The inspiration behind this technology draws its roots from the all-time famous and the best cryptocurrency to invest in now, Bitcoin.
Just how Bitcoin allows various entities to carry a copy of their transaction history and is not controlled by a central source. Similarly, DeFi is distinct and is ever-expanding the usage of blockchain technology from easy to complex use cases of finance. It would not be an exaggeration to say that most crypto enthusiasts are on a constant lookout for the top defi tokens to invest in 2021. The defi token prices and the upcoming defi coins are also constantly looked upon by enthusiasts.
What is the advantage of DeFi? Intermediaries in the transaction are completely removed from the equation. It leverages the decentralized networks and converts them into transparent protocols which can be run without any intermediaries such as banks.
The DeFi ecosystem provides a wide variety of innovative financial services. Some of the services are token issuance, lending, banking, insurance in a permissionless, open-source, and transparent network. Yes, one has complete autonomy over the most popular defi coins or assets while being connected to the peer-to-peer decentralized applications (Dapps).
Bring an open system, it is a great equalizer of the economy. Every individual who otherwise would not have the access to financial services can use them at ease. Being run on hundreds of devices a single point of failure is erased from the equation which otherwise exists in the normal financial services.
Top 5 DeFi tokens by market capitalization
Many popular DeFi platforms have designed their native tokens to incentivize users and facilitate the operations performed. These tokens are the most popular defi coins in the market. Every crypto enthusiast who is keen on being a part of the innovative marketplace should learn more about the top DeFi tokens, defi token prices, and their utilities. Although, the sudden surge in the DeFi marketplace has led to the emergence of new tokens. While this blog is being read, the entire market cap of the DeFi industry is near about $115 billion. This is quite a huge number for young technology like DeFi.
Price (22 June 2021)
One of the pioneers of the DeFi crypto projects is the Uniswap decentralized exchange. It is also one of the top 10 defi projects of 2021. It uses an Automated Market Marker system (AMM) to make sure that is enough liquidity for ERC20 tokens being traded on the site. This token allows investors to have complete control over the private keys and also allows them to integrate other external wallets that even lets them trade at lower fees.
It is considered as one of the best-performing tokens in the industry with a surge in the price of over 1100% in just eight months. It has a market cap of $13 billion and is considered one of the best in terms of valuation. Once investors buy the defi token UNI, they are also eligible for discounts and incentives on the Uniswap protocol.
One of the top DeFi tokens of 2021 is ChainLink. It acts as the link between the enormous amount of information being exchanged between crypto DApps. It is used to feed real-time data to smart contracts present on the blockchain. There are several functional utilities of the native token LINK on the platform.
ChainLink just like any other top decentralized platform has gained remarkable growth since its launch in 2019. Chain link cryptocurrency prices are expected to grow in the coming years.
Any investor must be aware of the volatility and price fluctuations the crypto and DeFi market brings with it, just like any other traditional asset market. However, if one is in search of a less volatile token then one can consider DAI. It’s a DeFi crypto coin that has been built using the blockchain technology behind Ethereum and thus, has its value pegged to that of the US dollar.
DAI is one of the first of its kind. How? It is one of the first DeFi tokens backed by a collateral asset. It was developed by MarkerDAO Protocol, believed to be one of the best platforms to build other decentralized applications and create defi coins.
The exchange rate of this token reflects the value of the US dollar against the other fiat currencies. Usage of DAI also reduces the delays involved while trading other financial markets along with reducing the transaction costs.
Another DeFi governance token, developed by the MakerDAO Protocol is Maker (MKR). MKR serves as the utility token while DAI works in reducing volatility. This is a reason why the Maker coins can be destroyed as well as created depending upon the price fluctuations in the market.
The MKR holders are accountable for adjusting the guidelines concerned with DAI. Investors even get voting rights in the MakerDAO ecosystem if one ever invests in Maker. These Defi governance tokens provide incentives to the investor in exchange for the participation of the governance of the ecosystem such as low fees and good interest rates.
Aave acts as the crypto lending service and is an open DeFi platform. It uses a non-custodial liquidity protocol that does not allow one to borrow crypto assets but also earn interest on them. This platform was first known as ETHLend when introduced in 2017. LEND was the native defi token of this platform. It then matched lenders with the borrowers. Later, new functionalities were added in 2018.
Top 3 DeFi trends in 2021
The 2020 growth in the DeFi market has taken the world by surprise. 14x growth was seen in 2020 in the total value locked (TVL) measure. What trends are expected in 2021? Well, TVL has already doubled to a value of $37.67 billion. Some of the latest trends that are expected in this year and the upcoming years are:
|Traditional assets entering DeFi Ecosystem|
|Monetizing Blockchain gaming|
|Increase scalability with cross-chain technology|
Traditional assets entering DeFi Ecosystem
- Options contract: They have garnered impressive momentum in the crypto space. There are a lot of platforms where one can trade crypto-based options and the most popular defi coins.
- Easy Hedging: These platforms allow crypto holders as well as minors to have an easy way of hedging their risks along with shorting certain assets.
- Tranche lending: It is also making its way from the traditional finance market to the crypto world.
Monetizing Blockchain gaming
- Increase in the number of gamers: DeFi seeks to monetize the blockchain gaming world. The number of gamers is increasing more than ever and by 2025 the value of the gaming industry is expected to reach $256 billion.
- Blockchain as a solution to increased monetization: Since the number of people dedicating themselves to this industry is increasing at an unprecedented rate both creators as well as players will want to monetize this industry more. One of the ways being blockchain gaming apart from other cryptocurrency investments and buying top defi tokens. These games might even lead to the creation of defi coins.
Increase scalability with cross-chain technology
- Huge gas fees: One of the major problems faced by the DeFi ecosystem is the increased transaction costs. Ethereum gas fees being one of the examples, which is the digital money anyone is required to pay while executing the transactions using the Ethereum blockchain.
- Slow network: The number of users using the DeFi ecosystem is also increasing which has reduced the speed of the entire network making it slow.
All these issues are being addressed with the help of cross-chain functionality, allowing transactions and smart contracts to cross from one chain to the other.
NFT vs DeFi
An NFT is a form of value storage. It is also an asset just like Bitcoin, gold, and the US dollar. The specialty about these assets is that they are non-fungible which means they cannot be replaced, replicated, or broken. This is the reason no two NFTs are similar.
DeFi on the other hand is a decentralized financial system that uses blockchain technology as stated above. It uses different tools such as cryptocurrencies, smart contracts, and oracles allowing financial management ranging from lending to invoicing.
While NFTs have value, DeFi can unlock value. However, DeFi cannot do the same for NFTs as it does for other digital assets or digital cash.
There is a niche market around NFTs such as digital art, digital real estate, or music by creators. This cannot be priced like that of loans. Assets can be priced in the DeFi ecosystem with price oracles. Although DeFi allows bonds, cryptocurrencies, and stock prices to be priced, the adequate price of an NFT cannot be retrieved.
Nifti, an Ethereum blockchain, allows the borrowers to put up NFT collaterals for the amount of loan they would like to receive using this DeFi ecosystem. Now, users just don’t have blockchain platforms for the best cryptocurrency to invest in but can also leverage their NFTs as collateral.
The Final Takeaway
A new financial system is under development with the DeFi ecosystem that is doing away with the centralized authorities. The upcoming defi tokens will lead to further development in the applications of blockchain. The collaboration between NFT and DeFi will also open new doors leading to new developments in the digital economy.
With the revolutionization of the gaming industry, decentralized financial assets, and entry of traditional assets into the crypto sphere, a lot of new trends are awaiting us. The Use cases around DeFi are expanding. Crypto enthusiasts have started to create defi coins apart from lending and borrowing and buying defi tokens. Thus, making crypto enthusiasts search for the top 10 defi projects of 2021 along with the top defi tokens. However, all of this begins with the journey of educating oneself before entering the volatile, unknown yet leveraging market of Crypto. Tune in to the CoinDCX blog for the latest news on cryptocurrency and the upcoming defi coins.
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