Decentralized finance (DeFi) is one of the hottest topics in the business and tech worlds.
We hope this post will help you enter the DeFi world with more confidence.
Decentralized finance (DeFi) is one of the hottest topics in the business and tech worlds. DeFi is an open, transparent, and free financial ecosystem; it’s also the fastest-growing sector of the crypto market.
In our previous post, we explained the basics of decentralized finance. We talked about what it is, how it works, and how it differs from centralized finance (CeFi). We also discussed the advantages and disadvantages of this new financial system. Make sure to check that post out if you haven’t already.
If you’re reading this, you probably want to get involved with DeFi. In this post, we’ll show you the best tools to start your DeFi journey. Which applications do you need? What can they do? How can they improve your financial life and workflow? We’re covering all of that.
We can measure the adoption of DeFi as a whole by looking at the “total value locked” — the amount of capital deposited in the DeFi system. As of March 22, 2021, the total value locked is $43.95B (USD) and this figure grows higher by the day.
We can also compare individual DeFi projects by looking at their specific locked values. According to Defipulse, the market leaders with the largest locked value at the moment are:
Intriguingly, most of these are Ethereum-based trading and lending systems. This indicates that Ethereum and decentralized lending are major trends to watch out for in the DeFi space. Another key trend to look out for is Binance Smart Chain. This is one of the most prominent competitors to Ethereum and has emerged as one of the leading blockchains for DeFi projects. The largest project on Binance Smart Chain is PancakeSwap, a liquidity provider, with a locked value of $2.01B.
Other buzzworthy projects are platforms which enable the integration of multiple blockchains. Polkadot and Cosmos have both garnered a lot of attention for the promise of interoperability between networks, transferring data seamlessly from one to the other. This means a transaction or application could be executed seamlessly on both the Bitcoin and Ethereum blockchains, for example. An alternative wrapped assets. That means “wrapping” Bitcoin in Ethereum by connecting two tokens, to give the former the DeFi utility of the latter. This increases the supply of tokens available for use in DeFi, though it creates some security concerns.
What makes DeFi special is the absence of controlling institutions — the “central” authorities that make up centralized finance. All you need to participate in DeFi is peer-to-peer Decentralized Applications, aka DApps.
Today, we’ll cover major DApps across different categories. Each has its own particular use, advantages, and weaknesses, so make sure to do your own research to find the exact right tool for you.
A wallet is needed to store and transact with any cryptocurrency, such as Bitcoin or Ethereum. The same goes for DeFi tokens like Uniswap, Dai, YFI, and more. The “token” of a DeFi platform is both a decentralized currency and store-of-value, as well as the actual mechanism that powers the platform. Holding tokens often gives the owner additional voting power and rewards.
Some of the most popular DeFi wallets are MetaMask, MyEtherWallet, Coinbase Wallet, and Argent. All of them are accessed by connecting a Web3 wallet and have no reliance on third-party entities, such as a bank. Only you can access your wallet with a unique private key, so be very careful not to lose it. The most secure option is a hardware wallet which connects directly to these DeFi protocols.
Since many DeFi users hold various types of tokens across different platforms, there are tools which help them track and manage their finances. Simply connect your wallets to track all of your decentralized assets and activity. You might think of this as somewhat similar to a CeFi budgeting app like Mint, which lets you connect your various accounts to see them all in one place.
The most widely-used portfolio managers are Zerion, Zapper, Gnosis Safe, and DeBank. Unlike a typical banking app, they require far less of your personal information to get started. They are also quite secure. Anonymity and security are among the most exciting advantages of DeFi.
Once you’ve set up a wallet (or multiple), you are participating in the DeFi revolution. But, the DeFi space is incredibly innovative and fast-moving. New DeFi applications and uses are created every day. In fact, there are so many that we can’t properly cover them here. But here is a list of applications for more advanced DeFi users:
A number of analytics tools have popped up to help DeFi users compare interest rates, token prices, and other key data. As you become more involved with DeFi, these tools are essential for getting the information you need to make smart, profitable decisions. Some of the most popular analytics tools are DeFiPulse, Loanscan, or MKR Tools.
As we’ve seen, there are countless DeFi tools, each for a dedicated DeFi operation. However, managing dozens or hundreds of platforms can be seriously challenging. Especially as DeFi grows and becomes more powerful, users need tools that combine multiple functions. This is faster, more efficient, and far more useful. This way, you can create your own custom DeFi strategy that works for you.
Here at Pontem Network, we are developing a user interface to easily create DeFi tools: Pontem Blocks. Pontem Blocks is perfect for all types of DeFi users, from seasoned DeFi experts, to those with coding experience but little knowledge of DeFi, and even complete beginners!
With Pontem Blocks, you can create your own DeFi app that aligns to your needs using a simple drag-and-drop system that anyone can master quickly.
Pontem Blocks offers unlimited possibilities for developers looking to build DeFi applications. Simply select from “blocks” of pre-set smart contracts to build your custom application — no coding skills required. You can do simple tasks like swapping tokens, more advanced actions like staking coins to provide liquidity, or even create completely new operations with custom smart contracts.
If you aren’t ready to design your own system, or simply don’t want to, select a Preset made by other developers. You can also construct your own Preset and monetize your work.
As PolkaDot grows in adoption and Diem introduces Facebook’s vast user base to crypto, Pontem Blocks can help you design interoperable DeFi tools for these platforms. Pontem Blocks makes development so much easier, so you can take advantage of the incredible, unlimited possibilities of DeFi. Now is the time to create a DeFi tool and take advantage of this ongoing financial revolution.
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