DeFi, which stands for “decentralized finance,” is the general term for non-fiat currencies and exchanges. They call it decentralized because these monetary processes occur without a middleman or central actor. DeFi is the future of currency, and developers and investors are seeing it too. They have lately become a supremely flexible and profitable area in terms of assets. Let’s check out five notable platforms to run cryptocurrency with this 2020.
Cred specializes in creating fiat loans from cryptocurrency, as well as the regular crypto-only loans and exchanges. It relies on the lending-borrowing system and has partnered with KYC verification providers, financial institutions, and crypto exchanges to make all this possible. Cred was also among the founders of Universal Protocol Alliance, which also includes Uphold, Omisego, and Bittrex International.
Cred has various partners for authenticating, exchanging, and e-wallet functions, as well as their asset security. Borrowing terms for each transaction are generated by an algorithm. The main requirement is that the collateral must more than compensate for the borrowed value. If the borrower is not able to comply, the deposits get liquidated. Lenders also have to go through this process, but they can also earn their interest through other fiat currencies and even supported tokens.
Around 30 cryptocurrencies can be exchanged on Cred and are in a majority of American states. It has turned to LBA as its utility token, and this brings in higher interest when lending, complemented by low interest for borrowing.
This platform allows staking and trading services for ERC20 tokens and Ethereum. Recently, Uniswap has dealt with more than half of Dex activity and Ethereum transactions. Within their trading services, 0.3% fees are transferred to the pool creators.
They are also unique in their dealings with ERC20 tokens, using $ETH as the bridge between ERC20 exchanges. This limits ERC20 to only one swap per token, but until it’s listed on Uniswap, it can be pooled by equivalent tokens and Ethereum. This will make it an even greater asset, and pool creators turn into lenders, and liquidity is maximized.
Ever since it started in 2018, Uniswap has accumulated $72 million of ERC20 and ETH by pools. Trends show that this is only going to rise in the coming years. It is precisely its decentralization that makes Uniswap so flexible and fast-moving.
Another open-source DeFi is Aave. Its algorithms are built by the same developers as ETHLend, one of the original lending platforms. The algorithm involves a pooling strategy that builds on the Ethereum. The deposits are made in a pooled system and borrow take loans from the same pool using collateral valued higher than what they borrow. This takes away the hassle of matching individual loans.
Aave only uses ERC20 tokens and $ETH, and interest rates are dependent on the fluctuations of the pool. Aave has a way of coping with the fluctuations by providing options for “variable” and “stable” rates. These assets are available for withdrawing at any time, and will automatically liquidate if a collateral drops to a value less than the supposed asset. The one who can liquidate the asset will avail of the corresponding collateral with a discount. This way, the liquidated amount remains at a minimum.
Aave is accessible through Metamask, Trust, and other mobile and browser wallets. It also uses LEND and aTokens, which are the Aave equivalent of ERC20 tokens, and have a 1:1 exchange to USD tokens. The aTokens are burned automatically come redemption of the asset. The aTokens are also useful for paying interest. Unique to their platform is Flash Loan, which allows the user to loan without collateral, as long as they deposit back to the Ethereum block they loaned from.
Learn.finance is described as an aggregator that allows users to maximize wealth from several lending platforms at a time. Although it’s new, its liquidity has reached around six million USD. Users can swap around DDEX, dYdX, Uniswap, Aave, and Compound. It also supports 6 cryptocurrencies, is insured by Nexus Mutual, and is competitive with its fees and rates.
You don’t even have to sign up! You just need to hook up your wallet. It uses yTokens and iTokens around the platform, which are wrapped and minted respectively. Passive investors can reap the benefits across different platforms using its specialized algorithms. Just choose the asset you want to earn from, and the algorithm will work for you.
The algorithm is also open-source, making a non-profit platform open for innovation and decentralization. And without any admin keys, Uniswap is safe from any lockdowns.
Compound is a DeFi which can support Ethereum, $USDC, $BAT, Wrapped BTC, and a few more, but it currently has more than 140 million USD worth of crypto circulating around it. Using pools like Aave and Uniswap, lenders earn through borrowing and interest.
It is partnered with huge players in the industry such as Paradigm Capital, Coinbase Ventures, and has made around 33 Million dollars in earnings. You will find their lending algorithm similar to those in Pool Together, and Coinbase Wallet.
During each deposit, new cTokens are created as intermediaries and are made to match the assets involved to help gain compounded interest as based on the market trends. These can later on be liquidated.