You know what they say: money you don’t hold is not really yours. Decentralized finance (DeFi) is built on this principle and aims to use peer-to-peer technology to revolutionize the economy. For example, if you want to pay an online casino using a DeFi application, you do not need to use an intermediary institution such as a bank: your payment will be transferred to the merchant instantly and at almost no cost. In this article, we briefly talk about how DeFi technology works and mention the best applications that are built on this technology.
What is Decentralized Finance?
In centralized economies, users’ money is always under the control of a third party (bank, tax office, government). Users do not actually own their money, as these third parties must give “permission” to send (or receive) money to another user. Because the same parties provide the infrastructure necessary for this transaction.
In decentralized economies, users (e.g., sellers and buyers) can exchange directly (peer to peer) without the use of an intermediary. The infrastructure (digital database) required for this job is stored and controlled by every user included in the system. DeFi applications are built on this principle. They are very diverse and are developed for different purposes. But in any case, their goal is to create an economy without a central authority. For this purpose, they each use their own blockchains and cryptocurrencies.
Pancake Swap is an exchange with over 3 million users, and over 41 million trades are made on it each month. You may be wondering how it differs from exchanges like Binance and Coinbase. Binance and Coinbase are centralized exchanges that want you to send your cryptos to their platforms (to their own wallets). In other words, you have to temporarily transfer the ownership of your funds to these platforms. Pancake Swap, on the other hand, is a decentralized exchange: it doesn’t want you to do anything like that. You can trade your cryptos by continuing to keep possession of them. During this process, you never need to give control to Pancake Swap. This DeFi runs on the BNB Smart Chain and offers both very low fees and staking rewards. Currently, more than $4.6 billion in crypto has been staked on Pancake Swap, and this number is increasing day by day.
Good Dollar describes itself as a non-profit organization and offers an ecosystem where you can earn crypto without mining. This system is built on smartphone applications. Anyone who downloads the iOS or Android app can get free G$ every 24 hours, determined by the number of users logged into the network that day. Good Dollar calls this “basic income”. (Of course, you can also buy the G$.) In any case, you can send your cryptos to other users, use them to shop from merchants included in the system or request crypto from other users. All these transactions take place in seconds via Good Dollar’s own blockchain. This DeFi app currently has 325,000 users, and the system has distributed G$424 million to date.
Katana is a DeFi application built on the Solana blockchain and supports smart contracts. It also offers very low transaction fees and near-instant transfers. You can think of Katana as a set of protocols developed for yield generation. Yield refers to the expected return on investment in a certain asset after a certain period of time, and in the crypto market, this is usually achieved by staking or lending multiple tokens. However, this is a complex technique used only by high-level experts.
Katana aims to facilitate the yield generation/farming process with a system called “vault”. Vaults are pools of a number of different cryptos, and Katana can generate them automatically. Then, it starts to implement automatic yield farming strategies for these pools and makes the best possible choices by following the market developments instantly. Thus, even beginners can benefit from advanced techniques.
Trader Joe is a decentralized trading platform running on the Avalanche blockchain. In other words, it is similar to exchange sites in a way but offers more than them. At Trader Joe, you can not only trade cryptos but also stake them, join one of the existing pools, farm new cryptos and even lend them. In this respect, it can offer much more than traditional exchange platforms with the advantages of DeFi technology. Trader Joe’s is also a launch platform, meaning you can launch a new crypto here for the first time.
MM Finance is the first DEX (decentralized exchange) on the Cronos blockchain. (MM stands for Mad Meerkat.) However, it plans to be an ecosystem in itself, not just an exchange. MM Finance has its own Yield Optimizer, NFT, Stablecoin and DTF. It is the cheapest exchange in the Cronos chain and the first ecosystem in this chain to use Protocol Owned Liquidity (POL). With the staking feature, you can get passive income, join pools or farm yields. It has more advanced financial features compared to Trader Joe and appeals to more experienced users for the same reason.