What Is a Decentralized Finance Cryptocurrency?
Simply put, DeFi cryptocurrencies are coins or tokens related to a project in the decentralized finance ecosystem. After DeFi’s massive explosion in popularity in 2020, major projects such as Compound and Terra have seen unprecedented adoption.
Decentralized cryptocurrencies are by nature trustless and permissionless, allowing any human with an internet connection and a phone to own them. DeFi makes this possible with dApps, as users rely on smart contracts, instead of centralized organizations, to create a secure network.
DeFi cryptocurrencies are used in a multitude of ways, from utility to governance. For example: PancakesSwap users who HODL $CAKE have access to yield-farming opportunities, staking and on proposals made by the community to ‘govern’ the ecosystem.
Top 5 DeFi Cryptocurrencies
Schnoodle is a progressive DeFi cryptocurrency. It is the world’s first truly trustless DAO with advanced bespoke technology including an automated wealth distribution system known as BARK (Blockchain Automated Reward Kickbacks), and a neoteric Moon Farming Platform. It’s like yield farming, but on the moon.
$LUNA is the native token of the Terra Network, a protocol based around Decentralized stablecoins. All stablecoins on the blockchain network are convertible into LUNA, the most important of them being their own stablecoin, UST (TerraUSD), created by Terra themselves.
Their mission is to reduce stablecoin volatility inside a cryptocurrency market known for its unpredictability. Reducing volatility attracts conversative investors and in-turn grows the crypto-sphere as a whole.
LUNA is also the token used to pay transaction fees on its network, vote on governance proposals and help towards the validation of the Terra network through their Delegated PoS method.
Let’s not forget, LUNA is backed and co-founded by one of the biggest ‘Crypto Celebrities’, Do Kwon.
PancakeSwap is one of the largest DEXs (Decentralized Exchanges) by volume, hosted on the Binance Smartchain. Following in Uniswaps footsteps, PancakeSwap has steadily grown its ecosystem, taking advance of Bsc’s low fees, to integrate many use cases into the $CAKE token to ensure its HODLers stay happy.
Whenever a transaction is made on PancakeSwap, a proportion of the fee charged is instantly sent back to the liquidity pool as a reward, another portion being used for $CAKE buyback to create constant positive price action for the token. If you believe in DeFi, you believe in PancakeSwap.
Another DAO token, $CRV is the native token of Curve Finance; An Automated-Market Maker providing a DEX platform with a focus on stablecoins. If you’re looking to trade assets of the same value, such as stablecoins, Curve is the place to do it.
Deep liquidity pools mean you can quickly, and with minimal spread, get any stablecoin on any blockchain network. $CRV is the governance token for the Curve network, where users can lockup their CRV tokens to receive veCRV, making them eligible to vote on proposals and receive staking rewards.
Curve finance service is helping create a reliable way to ‘trade’ assets across DeFi, a service which has not yet been tackled and often taken for granted in CeFi. If DeFi gains mass adoption, so will Curve.
Compound is a DeFi borrowing and lending protocol, aiming to provide what traditional banks provide in a decentralized manner. Users can deposit their crypto assets as lenders and receive rewards, whilst borrowers can take from liquidity pools through ‘collateralized loans’.
With over $500 million locked in their protocols, Compound is reshaping the way we think about loans, and the centralized finance system as a whole. Their native token, $COMP, is rewarded for many activities on their network such as withdrawals and borrowing crypto assets and is based on the amount of cTokens you hold.
Moreover, COMP holders get access to Compound Governance, like most DeFi projects, to push the network forward in a decentralized way.
If you truly believe in the core principles of cryptocurrencies; Trustless, Permissionless and Decentralized, then you believe in DeFi and what it could provide for millions around the world, unshackling them from the burden of corrupt or disinterested centralized authority.
Similar to any emerging market, not every project will survive. However, choosing projects such as Terra or Compound which solve fundamental problems within this emerging ecosystem gives you the best chance at picking a project with potential.
Finally, supporting DeFi cryptocurrencies which help facilitate decentralized, peer-to-peer trade means you are directly moving the financial world in a direction that is better for the individual, creating a trustless ecosystem built on the back of open-source smart contracts.