DeFi
What exactly is DeFi?
The application of technology in financial services is not novel. Nowadays, technology is used to complete the majority of transactions at banks and other financial service providers. However, technology’s position is limited to being a facilitator of such transactions.
DeFi is an abbreviation for “decentralized finance,” an umbrella word for various financial technologies based on cryptocurrencies or blockchain that disrupt financial intermediaries.
DeFi is inspired by blockchain, the code underlying the digital currency bitcoin, enabling several organizations to record a transaction history, implying that a centralized source does not regulate it. It is significant because centralized networks and human gatekeepers will restrict transaction speed and complexity while giving consumers less direct control over their assets. DeFi is unique because it extends blockchain applications beyond primary value transfer to more complicated financial use cases.
DeFi consumers can now deposit, lend, sell, spend, and pay without the need for a financial institution to function as an intermediary. Instead, decentralized smart contract protocols take the place of financial institutions.
Top 5 Finance Applications Built on the Ethereum Protocol
Maker — Maker is the most well-known DeFi software on the market today. About $7 billion in tokens were trapped in Maker protocol smart contracts on the blockchain.
MakerDAO is an Ethereum blockchain-based decentralized lending technology that follows the Dai (DAI), a USD-pegged stablecoin. Maker may be used to open a vault, store collateral such as ETH, and create DAI as a debt against that collateral.
DAI is the only stablecoin that has no restrictions on its use. It does not keep USD in reserve, unlike other dollar-backed stablecoins. The Maker protocol instead depends on smart contracts and collateralized ETH to preserve market stability,
Get Seaquake.io’s stories in your inbox
Join Medium for free to get updates from this writer.
Furthermore, DAI holders can lock their DAI into Maker’s Dai Savings Rate (DSR) contract and gain variable interest in Dai generated by stability fees.
Compound — The Compound is a decentralized money market protocol built on the Ethereum blockchain that enables holders of digital assets to invest and lend crypto against collateral. You will allocate money to Compound’s liquidity pool and start collecting compounding interest right away. Interest rates naturally change in response to supply and demand.
Compound saves 10% of interest charged as deposits, with the balance going to liquidity providers. The protocol has more than $6 billion in liquidity pools, making it one of the most common DeFi platforms available.
Aave — Aave is a non-custodial liquidity market mechanism. You can be involved as a lender or borrower. Borrowers can receive loans, while lenders have access to the market to collect passive profits.
Aave offers trustless, uncollateralized loans in which borrowing and redemption must occur concurrently. LEND is the protocol’s native governance token, but it can support up to 16 digital assets (13 of which can be collateral).
Aave now has over $5 billion tied up in its smart contract.
Uniswap — Uniswap is a decentralized trading protocol that allows users to exchange ETH and ERC20 tokens on-chain while also earning fees for supplying some liquidity. ERC20 tokens are converted using a simple UI in a confidential, safe, and non-custodial manner.
Users may use Uniswap to build markets (also known as liquidity pools) that help boost the protocol’s exchange liquidity. Each liquidity pair is represented by a one-of-a-kind, freely transferable ERC20 token.
Uniswap liquidity pools currently hold $4 billion in Ethereum tokens.
SushiSwap — SushiSwap is a decentralized technology that seeks to incentivize a user network by offering a forum for users to buy and sell digital assets. Essentially, it is a copy and paste of Uniswap, plus certain modifications to the open-source code of Uniswap.
Seaquake Crypto, PayPal, Andrew Katz, Dylan Knight, Seaquake.io, crypto exchange infrastructure, HFT, exchange infrastructure, Crypto Liquidity Provider, cryptocurrency liquidity provider, crypto exchange liquidity provider, crypto exchange software, cryptocurrency algorithmic trading, smart order routing, algorithmic trading, bitcoin algorithmic trading, crypto market making, crypto liquidity provider (edited)
