The Best DeFi DApps in 2021 - Decentralized Finance and Decentralized applications

What is DeFi (Decentralized Finance)?

DeFi was probably the hottest word in 2020 in the cryptocurrency world.

In support of decentralized finance, 2020 was a year of rapid movement towards decentralized finance as DeFi tokens such as UniSwap caused a massive stir in the market. Most DeFi projects are hosted on the Ethereum blockchain. In fact, Coindesk said, ‘Now DeFi defines Ethereum’. These projects are run through decentralized applications, called DApps (Decentralized Applications, also called ‘Dapps’). In this post, we will take a look at our best DeFi DApps in 2021.

What is defi (Decentralized Finance)? How to make profits with defi?

What is a DApp?

Decentralized Applications (DApps) are software applications that run on a blockchain. Unlike internet-based applications, dApps (DApps) do not require a central database to run. DApps (DApps) run on Ethereum but also run on other blockchains with smart contracts, such as EOS and TRON.

Some financial industry sees the DeFi app as driving a revolution, as it will be able to conduct financial business in a completely decentralized way without intermediaries. So, what is the best DeFi DApp? From now on, let’s briefly explain the 10 best DApps and each DApp.

What is defi on StormGain? How does it work?

1. MakerDAO

MakerDAO, called ‘Defi Godzilla’ in CoinDesk, has existed since 2015 when Ethereum was launched. MakerDAO is a lending platform that allows users to borrow Dai (DAI), a stablecoin that is linked to the US dollar. The secret to MakerDAO’s success as a lending platform was its decentralization.

Like all DApps (DApps), MakerDAO has no borders. Anyone in the world can use MakerDAO. No one is subject to a background check or credit check as when using a loan service through a bank. Dai (DAI) uses cryptocurrencies such as some Ethereum-based tokens (ERC-20) as collateral, including BAT.

This cryptocurrency is locked-up until the user is ready to repay the loan and any fees incurred. Once this happens, Ethereum will be released. However, if the Ethereum price falls below a certain level, the borrowed Dai (DAI) will be sold with a penalty added. This debt settlement method helps to stabilize the governance of the MakerDAO system.

2. Uniswap

Uniswap is a decentralized exchange (DEX) where anyone can participate in trading ERC-20 tokens without the control of centralized institutions or intermediaries. It allows for unauthorized access to financial services, making it suitable for the decentralized utopia of the Ethereum blockchain.

Uniswap is based on the Ethereum blockchain utilizing smart contracts. And it replaces the traditional trading function. For example, ordering books using an automated, permissionless, liquidity pool run by an algorithm This liquidity pool is a pair of Ethereum (ETH) and ERC-20 tokens exchanged by traders. Uniswap motivates users to provide liquidity to these pools by rewarding them with transaction fee sharing. When they provide liquidity, users receive a token called LP that tracks how much liquidity they have contributed.

This method of providing liquidity eliminates the need to rely on market makers. The advantage of using Uniswap or DEX is that the usage fee is very low. As it is hosted on the blockchain, it requires minimal maintenance costs. Also, they are very safe and less dangerous.

3. Compound

Compound is another lending DApp built on the Ethereum blockchain. Users can borrow and lend cryptocurrency from other users. All done through smart contract protocols. On the other hand, borrowers can earn interest on cryptocurrencies by putting them in a liquidity pool. To do this, you must first connect an Ethereum wallet such as MetaMask.

Tokens used by Compound are called cTokens. So, when a user deposits ETH, they get cETH in return. Let’s say that when a user deposits USDT, they are paid cUSDT in return. These tokens allow users to track the value of the loaned asset and the interest accrued on it.

The interest on all tokens will fluctuate according to native cryptocurrency demand. However, in general, the interest on the tokens will be higher than the interest provided by the savings account. Like other DApps (DApps), Compound does not require identification and has the advantage of low transaction fees. Also, the risk of a loan is very low, as the assets are over-collateralized (a security measure of more assets than necessary).

4. Curve

Curve quickly gained popularity in late 2020 and is now one of the most widely used DApps worldwide. Like Uniswap, it uses an automated liquidity pool. However, unlike Uniswap, it is specifically designed to be able to exchange stablecoins and Bitcoin-backed ERC 20 tokens such as Wraped Bitcoin (WBTC). As a result, maintenance costs are lowered, and fees are also lower.

Curve’s interface is not mainstream. However, this could be a deliberate maneuver. The very specific use of the curve shows that it is not designed for mainstream users. Therefore, many investors or traders will not want or need to exchange for stablecoins. Similar to Uniswap, users can be rewarded for adding liquidity to their liquidity pool. Curve is popular with interest farmers as it uses a lot of stable stablecoins for yield farming.

While the creators of the curve claim that the lack of tradable assets increases operational efficiency, the fact that only stablecoins (and Bitcoin-backed ERC-20 tokens) can be traded can also be a downside for users.

5. DYdX

DYdX is another DEX based on the Ethereum blockchain, that is, a Decentralized Exchange (DEX). However, unlike other DEXs, you can borrow and trade cryptocurrencies with a margin in DYDX. There are two types of margin trading available. Isolated Margin and Cross Margin trading. There are currently three trading pairs on the platform: Ethereum (ETH) and Dai (DAI), Ethereum (ETH) and USD Coin (USDC), and Dai (DAI) and USD Coin (USDC).

In addition to margin trading, users can earn interest by lending their assets and trade them on a regular basis. Transactions have a small miner fee.

Users can lend their assets to other users and earn interest. As with other loan dapps, the risk to the lender is low as it is over-collateralized. When taking out a loan, the minimum collateral ratio of DYDX is 125%.

6. Aave

Aave is another lending DApp built on the Ethereum blockchain that allows users to borrow assets and earn interest in the process. To do this, you need to connect your Ethereum wallet to a DApp (DApp). To some extent, it is similar to a compound.

However, Aave sets it apart from other dApps with an additional feature called Flash Loan. In fact, a flash loan is a loan that can only be made on one blockchain transaction. This allows for unsecured loans. But how is this possible?

This is possible because you can always reverse the transaction if you do not repay the loan. Assets for flash loans are procured from a pool of smart contracts. Aave rates on flash loans are as low as 0.30%. Moreover, flash loans paved the way for arbitrage. To do this, traders can take out a loan, arbitrage, and then pay off both the loan and the interest accrued.

7. Yearn Finance (YFI)

Yearn Finance is one of the new faces of blockchain launched in July 2020, but it has quickly become one of the most popular DeFi DApps. The yield aggregator does virtually all the interest farming for you. It automatically searches for DeFi DApps on the Ethereum blockchain and produces the best returns.

The YFI token has seen a significant price increase since its launch. In July, the price at launch was $739, and by September it had quickly skyrocketed to over $43,000. Analysts believe that people in the DeFi space stem from a strong sense of trust in Soft Finance, whose product range is expanding.

Vaults are the main product of Yearn Finance that allows users to deposit cryptocurrencies and earn returns in return. Vault uses a more complex strategy to earn more interest than the original product. This is called Earn. Thus, the term Yearn, a combination of Yields and Earn, was born.

What is Yearn Finance (YFI) and how does it work?

8. Synthetix

Synthetix allows users to use ERC-20 tokens to invest in the price of real assets such as other cryptocurrencies, stocks and precious metals. These tokens, known as synthestics or ‘synths’, are able to track the price of these assets.

Similar to Maker DAO, where users need to lock-up with Ethereum (ETH) to create the stablecoin Dai (DAI), users on Synthix are the platform’s native stablecoin. You must lock-up a Synthetic Network Token (SNX) that is collateralized in Synthetics USD (sUSD).

To get real information about the price of an asset, Synthetix works with Chainlink and Oracle technology to provide a decentralized price feed.

9. New Dex (New DEX)

So far, we have only focused on Ethereum-based dApps. Let’s share some of this interest with other blockchain-based DApps. Newdex is the first Decentralized Exchange (DEX) based on the EOS blockchain. As of December 2020, Nudex is the most popular EOS DApp in terms of volume. Nudex also runs on the TRON blockchain.

Like other DEXs, Newdex does not require KYC or gives you direct access to your funds. You can trade various EOS (EOS) trading pairs and use them on sidechains like BOS (BOS) and Telos (TLOS).

The high scalability of EOS (compared to Ethereum) gave the EOS dApp an advantage in terms of transactions per second (TPS). However, these advantages of EOS may disappear after Ethereum 2.0 is fully implemented. Nevertheless, Nudex is an excellent choice for users looking for an alternative to Ethereum.

10. Augur

Known as “your global, limitless betting platform”, Augur allows users to bet on a variety of real-world events such as sports, economics and elections. During the Initial Coin Offering (ICO) in 2015, 2,000 BTC (Bitcoin) and 100,000 ETH (Ethereum) were collected.

At the heart of Augur is a tradable token known as Reputation (REP). These tokens can be used to place bets, dispute bets, and purchase participation tokens. Reputation (*reputation) is a fitting name for a token, as it can be earned just because a bet is right to be debatable. Reputation can also be earned while buying and reporting bets.

Users buy or sell shares according to the outcome of the event. The creators of Augur see the platform as the answer to a ‘broken’ betting ecosystem where users easily lower their bet limits and close their accounts. Since Augur is 100% decentralized and peer-to-peer, this cannot happen.

Conclusion

As DeFi continues to grow, DApps (DApps) are bound to become more and more common. DApps (DApps) have distinct advantages over traditional applications: the fact that there is no downtime, users have full control over their funds, and transaction fees are very low. Also, the more widely used cryptocurrencies, the more people will accept them as a means of trading. DApps (DApps) such as Uniswap can be used to earn unearned income.

Blockchain Explorer predicts that “the market size of DApps is expected to reach $21.72 billion by the end of 2025.” Despite this, there are still issues to be addressed. Development can be very expensive and tends to suffer from a lack of user-friendliness. While these factors are improving, it may still be some time before dApps (DApps) become fully mainstream in the market.

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