What Is DeFi? The Top DeFi Projects For 2021 | Baanx
February 12, 2021
What is DeFi and our pick of the top decentralised finance projects to watch in 2021
People around the world are using the Ethereum blockchain to construct a new economic framework that promises to set new standards for financial access, opportunities and trustless interactions. This decentralised financial network of operators and participants is commonly referred to as DeFi. But, what exactly is DeFi?
How DeFi departs from traditional finance
DeFi departs from traditional, centralised financial infrastructure managed by central authorities, institutions and intermediaries over to a decentralised peer-to-peer system operating on the Ethereum blockchain infrastructure and governed by code. DeFi developers are using smart contracts on Ethereum to launch financial protocols and platforms available to everyone with Internet access. The breakthrough of DeFi is that the participants directly govern the infrastructure as well as developing applications previously not possible with traditional fiat financial assets.
The DeFi ecosystem is an expansive network of integrated protocols and financial instruments spanning decentralised exchanges (DEXs) and stablecoins, to loan platforms with lower barriers to entry for those underserved by traditional finance. With over $35 billion invested in DeFi tokens, decentralised finance is the most active and promising sector in the blockchain space.
Our pick: the four DeFi projects to watch in 2021
Demand is steadily growing among conscious consumers for traceability of products along supply chains. Enter SUKU: the leading DeFi protocol helping brands and retailers confirm the provenance of their goods.
At its core, SUKU is a social impact supply chain transparency solution that acts as a microfinancing ecosystem to serve the unbanked. The protocol offers decentralised financial services to those who struggle to gain access to traditional forms of finance.
The ecosystem works by suppliers providing data and verifying product transparency in return for access to DeFi services. The aim is to encourage small-scale suppliers to participate—especially farmers and craftspeople—since they are most often underserved by the traditional financial sector and because they mark the beginning of many product journeys.
Uniswap is a decentralised exchange (DEX) that offers a trustless and permissionless gateway to financial markets. The exchange allows users to deposit ERC-20 tokens in liquidity pools governed by smart contracts that balance the liquidity of the various tokens across the exchange. The users, or liquidity providers, receive a percentage of the trading fees made from their deposit.
On 30 August 2020, the exchange hit an unexpected yet auspicious milestone that clearly reflected user interest in the DEX when its daily trading volume peaked at $426 million and surpassed Coinbase, the largest US cryptocurrency exchange, by $78m.
The Polkadot network focuses on blockchain interoperability. It aims to establish a decentralised web that protects user identity and data from a central authority. As a part of their mission, they enable developers to build web-based decentralised apps (dApps) and connect them to organisations. Several projects use the Polkadot network including the distributed ledger consultancy ChainSafe and the DeFi project Reef Finance.
Interest in smart contracts (programmable, self executing accounts running on the Ethereum blockchain) has been steadily increasing. Yet, a major hurdle is how to effectively integrate real world data into them. This is where the Chainlink network offers a solution to securely write real world information into smart contracts.
Chainlink has been growing from strength to strength since its 2017 initial coin offering (ICO). With the highest DeFi coin market cap at $9.3bn, the network has already completed several milestones.
Integrating DeFi features with Baanx
Baanx supports your business by providing the infrastructure to safely and securely launch the digital payment products you require. If you are a DeFi project or DEX we can support you along your digital currency journey by integrating DeFi and fiat financial instruments in a matter of weeks to give you the connectivity and automation you require at cost.
If you want to learn more about the Baanx OPEN API platform and how we can help you, then get in touch.