For the past few months, Decentralized Finance (DeFi) is one of the hot topics in the blockchain space. Everyone is focused on the growth of decentralized finance applications, which will finally make our economic model transparent.
DeFi is using blockchain technology to ensure that our financial system is fully decentralized, distributed, and secured, unlike traditional means. In reality, it’s one of the fast-growing sectors in the crypto space.
Feeling intrigued? Let’s check out some of the popular decentralized finance applications on the market that you can try out today. So, let’s start!
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What Are Decentralized Finance Applications?
Before we start looking into DeFi applications, I’ll briefly explain the concept behind Decentralized Finance.
Decentralized finance is the peer-to-peer finance system or network that is powered by decentralized technologies. In simple terms, it’s actually the shift from a centralized and traditional financial system to a more decentralized and peer-to-peer network.
Decentralized finance companies are bringing an entire ecosystem full of applications starting from borrowing and lending platforms to tokenizing assets. So, in this case, decentralized finance applications are nothing more than blockchain or distributed applications developed specifically for the financial industries.
Also, most of these applications are using Ethereum as the underlying technology. In reality, our traditional financial system mainly runs on centralized infrastructure, which is highly flawed. On the other hand, decentralized finance applications get rid of the issues that come from the centralized infrastructure.
So, it’s a great approach to digitizing this sector without any issues with the legacy systems.
Therefore, if you only have an internet connection, you can access all these Defi apps built to streamline all your financial needs.
The breakthrough of DeFi is really changing the scenario of our financial systems. Now we can use crypto assets in so many ways that were never possible with real-world currencies. The paradigm shift in the economic infrastructure presents us with a lot of opportunities and gets rid of risks and trust issues.
What Are Best Decentralized Finance Applications in The Market?
From synthetic assets to DAOs, decentralized finance companies are unlocking opportunities for a completely new economic model around the world. More so, the vesta mount of use cases of this sector is proof that this is more than just a bunch of DeFi projects.
It’s an integrated effort to develop a complete ecosystem of finance that shifts from traditional centralized services. Therefore, let’s look at the best decentralized finance applications to understand what benefits you can expect from these.
So, let’s start!
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Decentralized finance applications will help you be the sole custodian of your information. Therefore, it includes managing your crypto asset as well. There are many crypto wallets that will help you securely and efficiently interact with applications for selling, buying, transferring, and earning interest on your assets.
So, in the DeFi projects space, you will own your data, not any third parties or any government agencies.
- MetaMask: MetaMask offers the security and usability needed for a getaway to blockchain applications. However, it’s also a wallet, and it can handle account management along with connecting any individual to the blockchain. More so, it even offers hardware wallets, which is totally isolated from the site.
- Gnosis Safe: Using this application, you can fully customize and manage all your crypto assets. It even allows you to store them on multiple devices. For example, it offers EOA-based wallets, hardware wallets, paper wallets, or even a combination of these three.
Compliance and KYT
Basically, in the traditional finance companies, know-your-customer guidelines help counter-the-financing-of-terrorism (CFT) and promote anti-money laundering (AML). However, as the system is fragile, hackers can hack through the system and easily bypass all the security protocols.
Therefore, DeFi takes this system to a new height. Without focusing on customer identities, they are focusing on customer addresses. So, instead of know your customer, the applications focus on know-your-transactions (KYT). This helps to prevent risk in real-time and gets rid of any options for financial crimes.
- Codefi Compliance: This application offers KYT processes that help businesses to assess any risky behaviors from the very start. Therefore, it can offer CFT and AML checks to identify any fraudulent activities or even terrorisms.
- KYC-Chain: KYC-Chain is another application that offers you an array of features. You will get KYC and AML checks, identity and verification, crypto wallet AML, scalable and secure network, and access to the Selfkey network.
DAO is actually a decentralized autonomous organization that focuses on decentralized and transparent business models. Basically, these types of organizations are based on blockchain technology and are incredibly different from traditional organizations.
Anyhow, there are applications that focus on managing financial operations, fundraising, and maintaining decentralized governance in DAOs.
- Maker: MKR holders actually governs the MakerDAO protocols. And this will include adjusting policy for Dai, improving governance, selecting different collateral types, offering security and transparency.
- Compound: Compound is also another application for DAO, where the decentralized community is the COMP token holders. More so, they can propose or even vote on upgrades related to the primary protocol.
Wondering how DAOs actually work? Go through the decentralized organization guide to get your answer.
Data and Analytics
Decentralized finance applications come with unprecedented transparency for network activity and transactional data. That’s why using DeFi protocols can help you in data analysis, discovery, and profound decision-making opportunities. The explosive popularity of these applications is leading to the development of various dashboards and tools. In reality, some of them can even help you assess any platform risks, track the value of your assets, and compare them for the liquidity process.
- Codefi Data: Codefi Data is a suite for data management and analytics. You can use this solution in the investment ecosystem, such as public blockchain tokens, digital assets, decentralized finance protocols, and so on. Other than this, it also offers performance metrics and security.
- DeFi Pulse: It’s a DeFi live tracker. Here, you can find all the latest rankings of DeFi protocols and their analytics. Typically, they track the total value that is locked into the smart contacts of these applications.
Using Ethereum based smart contracts, DeFi is now introducing a new type of tokenized derivatives. Usually, these derivatives are directly linked to an underlying asset, and the performance shifts based on that asset.
More so, you can use DeFi derivatives to represent any real-world bonds, currencies, commodities, and even cryptocurrencies.
- bZx: It’s a margin lending protocol based on Ethereum blockchain. Furthermore, you can use this application to build other platforms that offer borrowing, lending, and trading facilities. So, even if you are a borrower or lender, you will be the one in control of the keys.
- dYdX: dYdX is a great application that will let you trade, borrow, lend, and even manage your assets directly. More so, you can use your crypto holdings as collateral for borrowing other assets. Tracking your performance and your assets is quite easy as well.
Applications of decentralized finance offer composability. In reality, it means that it allows different components within a system to easily communicate, connect, and interoperate. Using this technique, communities are building upon what other developers have already built, making it one of the most prominent and powerful networks at this moment.
You can think of building DeFi applications like building with Legos. There are lots of tools dedicates specifically to the infrastructure development of blockchain platforms. More so, these are definitely some of the best tools that developers tend to love for their blockchain solutions.
- Truffle Suite: Truffle Suite is a combination of development tools that will let you create a new infrastructure from scratch. It contains three tools for compiling, testing, debugging, and deploying – Truffle, Ganache, and Drizzle.
- Infura: Using Infura, you can immediately connect your application to their APIs and use their support for interface to run your app. The best part is that you can do it with only 1 single URL. More so, they offer management services so that you can focus on project development.
There are many other blockchain tools that can help you develop decentralized solutions. Check out blockchain tools that developers love to learn more about these.
Another popular use case of DeFi is the well-known decentralized exchange applications. Mainly these are cryptocurrency exchanges that don’t need any central authority. More so, it allows users to transact directly with other peers and ensure that the control remains only to the users. Thus, it helps to reduce any price manipulation, any kind of theft, or hacks.
Furthermore, these decentralized exchanges offer liquidity for certain projects, mainly when it comes to rival centralized exchanges.
More so, some exchanges may use decentralization to a certain extent without fully getting rid of the centralized servers.
- AirSwap: AirSwap is a great peer-to-peer trading decentralized finance application. In reality, it uses Ethereum as the underlying technology. More so, you won’t need any fees, deposits, or sign-ups to trade. It also offers a secure and easy to use interface that promotes liquidity of the assets.
- Uniswap Exchange: This is also based on Ethereum and offers automated liquidity protocol. The formula they use is quite unique, and they use non-upgradeable smart contracts for that. Therefore, you can access trusted intermediaries, great security, censor resistance, and prioritize decentralization using this.
Decentralized finance applications are in the gaming world as well. More so, using these applications, gamers can now unlock the opportunity to handle their in-app purchases without any risks of credit card hacks. More so, these applications now offer unique incentive models, which is hard to come across in typical gaming experience.
This will surely enhance your gaming experience without worrying too much about your finances.
- PoolTogether: It’s an audited savings game where there is no-loss for you. Additionally, it uses Ethereum to make it completely decentralized. All you have to do is use Dai to get tickets from the pool. Every single Dai in the pool will get interest, so it’s a win-win situation for everyone.
Borrowing and Lending
Borrowing and lending use one of the most prominent use cases for the applications of decentralized finance. In reality, users can lend their cryptocurrencies to a lending pool and earn interests based on that. Based on their criteria, many applications match the borrower and lender, getting rid of any trust issues along the way.
- Aave: It’s an open-source protocol that creates different kinds of money markets. Here, you can earn interest based on your borrowing and depositing assets. More so, depositors are responsible for increasing the liquidity, and borrowers can borrow any asset in undercollateralized or overcollateralized fashion.
- Dharma: Dharma offers a suite of developer tools and smart contracts that helps in lending and borrowing crypto-assets. More so, the application offers access to 2000+ tokens, where you will need no Gas fees for trading. You can even withdraw anytime you want.
You can pair applications of decentralized finance with blockchain-based identity systems to give users access to a global economic platform. More so, this will help users get access to their own identity and use it as portable identification whenever they need it.
On top of this, you can expect high security for your financial information and your personal documentations because no third party can get access to it. You can even choose to share partial information to your clients without disclosing your personal data.
- Civic: Civic is a decentralized identity ecosystem. Here, you will have to verify your identity once, and then you can use it as much as you want. Furthermore, you can choose which company you trust to share your information. So, you don’t have to overshare anything else.
- uPort: At uPort, you will be getting a self-sovereign identity with just a few clicks. In reality, this tool will offer any individual to share their data in a secure, simple, and private way. It comes in two variations – the public and private sectors.
DeFi is surely talking over the insurance industries as well. Due to the lack of proper management and security, this sector deals with contract breaches and false insurance claims. Also, the process of insurance claiming takes a lot of time. That’s why a number of innovative decentralized application in this spectrum is using blockchain to protect and cover contracts and help to streamline insurance claims faster.
- Etherisc: DIP Foundation supports the ecosystem, and it contains oracle providers, product builders, resellers, risk pool keepers, claim adjusters, underwriters, and relayers. Anyhow, it’s a great application for building risk transfer solutions solely for the insurance industry.
- Nexus Mutual: Nexus Mutual is a unique application that gets rid of the concept of insurance companies. Here, you can share the risk with other parties in a pool without needing any company to back it up. More so, they offer a backup solution for any disaster like faulty smart contracts or DAO hack.
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In reality, margin traders can borrow funds from a lender and utilize their trades in a typical finance system. However, in DeFi, this trading is fully decentralized and offers non-custodial lending protocols. Due to the fact that smart contracts are connected to the majority of this type of application, many call them “autonomous money markets” at the moment.
- Fulcrum: Fulcrum is a decentralized finance application for tokenizing margin trading and lending processes. It doesn’t need any KYC and AML, and it offers non-custodial solutions. The automated renew and no rollover fees help to maintain a seamless experience.
- DDEX: DDEX offers instant borrowing, interest in lending from the start, and 5x leveraged trading. More so, all the smart contracts are audited and secured along with accessible mobile devices.
Stablecoins fall under the spectrum of DeFi as well. Mainly these are cryptocurrencies, but they are pegged to any kind of stable asset. It can be fiat money, or gold, or even other cryptocurrencies. In reality, stablecoins are here to reduce the volatile nature of cryptocurrencies and make them a good source of digital currency. At present, many central bank digital currency (CBDC) protocols are using stablecoins.
- Dai: Dai is a stablecoin that is pegged against USD. Here, 1 Dai = 1 USD. The stablecoin uses Ethereum based platform, and MakerDAO is governance behind it. In reality, there is no discrimination when it comes to Dai as it offers stable pricing all the time.
- Gemini Dollar: Gemini Dollar is also pegged against the U.S. dollar. Here, it’s in a 1:1 ration to USD. More so, it offers high scalability and usability in any environment, getting rid of all volatile nature of traditional cryptos.
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Online marketplaces are another great use case of DeFi. The applications of decentralized finance help users exchange products directly without any third party. More so, it also promotes globalization when it comes to online marketplaces. You can even do freelance gigs on these applications if you want to.
- Gitcoin: Gitcoin is a marketplace for your development work. It’s an open-source marketplace, which means all your development work here will be for the public. It offers workshops, a growing environment for your projects, and certain payouts to help you keep contributing.
- Ethlance: It’s a different take on the blockchain, which is kind of similar to popular platforms like Upwork, Fiverr, etc. But instead of getting paid in money, you will get paid in Ether. At the moment, they are not taking any cut from your payouts, so any money you are making from it is completely yours.
Well, the primary use case of the DeFi application starts off with a peer-to-peer payments system. That’s why most of the best decentralized finance applications offer this functionality to all the users. In reality, blockchain technology is more than enough to ensure a secure and direct connection to other users without needing any third-parties.
But DeFi payments takes it to a whole new level. It’s creating a more open space for safely sending and receiving payments around the globe.
- Request Network: It’s a payments network that uses IPFS and Ethereum. Anyhow, using this application, you can get access to standards, infrastructures for building your very own payments project.
- Groundhog: Groundhog is an awesome toolbox developed specifically for creating subscriptions that are crypto-based. In reality, adding Groundhog to your application is a simple task with only a few lines of code. More so, you can transfer money to this wallet using any crypto wallet or a bank account.
Read More: Ethereum Smart Contracts Ultimate Guide
There are many applications of decentralized finance solely built for prediction markets. In reality, these applications can easily analyze the data and consumer behaviors to successfully predict any changes.
In any case, market prices can indirectly indicate certain events. Thus, these applications analyze the situation and can offer you the results around the economic event, election results, and even sports games.
- Augur: Who doesn’t like prediction market apps? Augur is now one of the leading prediction market applications on the market with no limit to what you can bet on. It totally is up to you on how much you want to bet on.
- Gnosis: Gnosis is rather a platform that lets you develop prediction market solutions based on Ethereum. So, it’s more of a developer’s tool where they can get access to resources, information, and financial infrastructures.
These are more or less related to stablecoins. In reality, these assets are a mixture of other assets such as fiat money, gold, or cryptocurrencies for offering a stable value. For example, a certain percentage or fiat money and gold can make up a synthetic asset.
Furthermore, this process helps to absorb any price shock that may happen later in the future. So, if the prices of gold fluctuated, the fiat money can back it up and make the end value stable.
- Synthetix: Synthetix is a unique application that offers a mixture of various assets for a stable value asset. At present, it’s the backbone of derivatives trading with synthetic assets. Anyhow, Synthetix Network Token backs up every single asset on the application.
Also Read: 50+ Top DeFi Projects in 2020
DeFi Applications Are Changing the Future of Our Economy
DeFi apps are slowly but surely changing the economic model of the world. Even a decade ago, imagining a completely decentralized finance system was impossible. However, blockchain technology is slowly paving the way for offering us the next technological revolution.
Although these applications aren’t perfect, these are still managing to replace the error-prone legacy systems.
If you are more interested in learning about decentralized finance, then I would suggest starting out with our Introduction to DeFi course!
*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. Do your own research and make sure you read our full Disclaimer.