-What is DeFi
-What are the advantages of DeFi
-Top 5 Defi cryptocurrencies people invest in 2021
The recent years have seen a massive inclination towards cryptocurrency and decentralized financial (DeFi) systems. It has attracted investors across the globe with the current market capitalization of cryptocurrencies standing at $ 2 trillion and more. With new terms popping up in this sector each day it becomes extremely significant for crypto enthusiasts to stay updated with them. The new technology and the jargon around them require crypto investors to be at par with the evolving world.
In today’s blog, we will uncover yet another jargon called ‘DeFi’. We will also analyze the top defi cryptocurrencies that people should invest in, in 2021 and can even look forward to in the coming years of the crypto boom. Before we deep dive into the top 5 DeFi cryptocurrencies, people are investing in let’s understand what is DeFi and what are its advantages.
Read about the top cryptocurrencies people are investing in 2021.
What is DeFi
DeFi in the easiest and layman terms refers to the financial applications that have been built on the underlying technology of blockchain. The primary goal of this technology is to democratize the entire economy and remove any intermediaries involved in the transactions. Decentralized finance (DeFi) applications are blockchain-based apps that resemble the traditional finance and banking sector but without the involvement of any third party.
Also Read: How does Defi Lending Work?
People can use these Decentralized finance (DeFi) platforms to borrow or lend money from each other, insure themselves against hazards, trade cryptocurrencies, or even earn income through their saving accounts (Staking). The DeFi uses an extremely layered structure. The financial activities are conducted through decentralized applications (DApps), distributed ledgers across blockchain, and popularized by Bitcoin. These transactions are made directly between the lender and the borrower and are governed by smart contracts. These smart contracts are computer programs that require no third-party management like in the case of centralized finance. These smart contracts also called the DeFi protocols often run on open-source software which is developed as well as maintained by the developers’ community.
What are the advantages of DeFi?
|The security is strict in the case of Decentralized finance|
|No intervention of third-parties|
|Provides faster settlements for users|
The security is strict in the case of Decentralized finance – The security measures are quite strict in the case of decentralized applications (DApps) or DeFi in general. It takes a lot of effort and money to replicate transactions on a blockchain system, thereby reducing the chances of frauds and scams. Most of the applications these days run on Proof-of-stake rather than proof-of-work, therefore the process to commit any sort of fraud or cybercrime has become more difficult.
No intervention of third parties– Decentralized finance (DeFi) does not require any intervention of third parties for the conduction of transactions. These transactions are automatically executed with the help of smart contracts, computer programs that govern the transactions on blockchains. Therefore, the extra amount that a user had to pay in a centralized system to the intermediaries is saved in the case of decentralized finance.
Provides faster settlements for users – In the centralized system, the time taken to execute a transaction ranges from minutes to days. However, in the DeFi system transactions are executed within seconds.
Higher transparency– Decentralized Finance system is extremely transparent. The users know exactly what is happening to their hard-earned money.
Top 5 DeFi cryptocurrencies People invest in 2021
The top defi cryptocurrencies by Market capitalization in 2021 are:
|Token||Price||Market Cap||Circulating supply|
|Terra (LUNA)||$42.96||$17,193,940,250||401,315,931 LUNA|
|Uniswap (UNI)||$26.33||$16,084,179,830||611,643,724 UNI|
|Avalanche (AVAX)||$66.16||$14,587,521,732||220,286,577 AVAX|
|Chainlink (LINK)||$30.60||$14,065,359,208||461,009,554 LINK|
|Wrapped Bitcoin (WBTC)||$61,897.61||$13,735,675,670||221,793 WBTC|
Summing it up!
Decentralized finance is taking the world by storm. DeFi tokens have been in huge demand after the surge in cryptocurrencies. The perks of DeFi tokens are slowly being understood by the crypto community. Easier transactions, more transparency, strict security, and no intervention of third parties have led to the surge in rising of DeFi and thus DeFi cryptocurrencies. The top defi cryptocurrencies people are investing in 2021 must be kept in mind by any crypto enthusiast and investor while making their next investment move.
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Disclaimer: It is advisable to dive into an investment after conducting thorough research. The article is not aimed at any financial advice. *All prices are as of October 25th, 2021.