Unpacking the DeFi Token Universe: A Brief Explanation

Decentralized finance (DeFi) has continued its boom since the beginning of DeFi Summer 2020. However, for those who are new to the space, even the basic concept of DeFi tokens can quickly get complicated.

Most people enter the world of cryptocurrencies through bitcoin, or at least once. With the growth of NFTs and meme currencies, people’s first entry into the world of cryptocurrencies has expanded.

DeFi’s growth has gone hand in hand with this expansion, but it hasn’t gained much in terms of simplicity. This means that while someone entering cryptocurrency may take the purchase of a work of art or hold a Shiba Inu coin in their hand, they will not immediately understand the purpose of the tokens for DeFi.

This is because DeFi tokens have a wider utility than an advertised coin. Users can use them for loans, as collateral, governance and investment. Projects create these tokens to enable their specific goals.

Discuss the use of the DeFi token

DeFi tokens are not like everyday bitcoins. While bitcoin is just beginning to build an ecosystem as a currency, DeFi is already used on a daily basis for financial services purposes.

This is what makes DeFi tokens a bit more complicated. y are not just a medium of exchange for goods and services. y understand much more.


Since when DeFi’s goal is to offer an alternative to traditional financial systems, regulatory rules must be established that allow DeFi projects to make important decisions regarding protocol changes.

That is why governance is based on a framework of rules and operations to regulate all actions on the network. An advantage of owning a governance token is that users make decisions that affect the future protocol and definition of the project by offering proposals or submitting a vote.


advantage of DeFi is accessible financial resources without the need for intermediaries or bureaucracy. Token holders can receive these guaranteed loans as long as they have contributed to the liquidity of the platform in return.

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Another use of DeFi tokens is as a speculative investment. People buy and hold tokens because they expect them to increase in value. However, just like owning any cryptocurrency, there are risks involved. From volatility to security breaches, DeeFi protocols are not immune to vulnerabilities.


This involves the act of ‘blocking’ a portion of cryptocurrency holdings for a period of time. This is a way of making contributions to a blockchain network.

In this way, stakeholders can receive rewards, often in the form of additional tokens. Simply put, the cryptocurrency bet is on par with the bank money deposit. When this is done, the depositor essentially “locks in” his wealth and, in turn, ends up being rewarded with interest.

A quick look at some of the most popular DeFi tokens

Currently, there are 214 DeFi tokens to choose from, each with different characteristics. se are some of the most popular platforms and their tokens.

Aave – 16,000,000 AAVE

Aave is one of the DeFi platforms at the moment. This liquidity protocol allows users to earn interest on deposits or borrow assets. Its native token is called LEND. Participants use it to obtain reduced fees with future projections of participation in governance. This means that users can participate as borrowers or depositors. platform deposits users’ funds into a non-custodial smart contract on the Ethereum (ETH) blockchain.

year – 30,000 YFI

yEarn protocol serves as an automated bounce aggregator governed by the native token, YFI. It guarantees diverse opportunities for agricultural production. Holders can bet on YFI to participate in governance, with the added benefit of requiring a prorated portion of platform fees.

Ren Protocol – 1,000,000,000 REN

Ren protocol exists as a compliant link that brings resources to Ethereum using the RenVM network while functioning as a decentralized, permissionless virtual machine protocol. Users must offer 100,000 REN as collateral to be eligible to host a dark node. In turn, they are entitled to a prorated participation that covers all trading fees, which are then charged by the platform. Ren allows tokens to be wrapped in ERC20, making it easier for Defi platforms to support a token standard.

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Uniswap – 1,000,000,000 UNI

Uniswap is the leading DeFi decentralized exchange and has its own native UNI token based on the Ethereum blockchain. Users initially received UNI as a reward for participating in the exchange, and users with large enough UNI shares can vote on various proposed policies for the Uniswap platform. UNI has a market capitalization of over $ 18 billion, making it one of the most valuable DeFi tokens.

Not all DeFi tokens are the same

As with any space that is proving profitable, DeFi is not without its scams and real value issues.

“Most of the coins in DeFi are worthless. Most of it is not related to the cash flow generated by the project and the ‘value’ they offer often pays you in more useless tokens, ”explains Red, Community Foreman at Harvest Finance and a leader in DeFi returns aggregator.

“It is important to look at what happens to these projects after the initial wave of publicity. cash lobsters flock to the new farms with their high emissions, eat all the rewards and move on to the next thing, leaving a bomb and scrap token where the project is probably not feasible, “he says.

However, this is not a specific DeFi issue. Red compares this to the current hype around NFTs.

“re may be value in a small percentage of NFT, but most of the NFTs we’re looking at are just variations of a useless animal ‘pfp’ and people hoping to cash in on the NFT craze,” he says.

refore, those new to the DeFi space should really consider the totality of the projects that interest them. Many legitimate and valuable projects that have successful tokens also have well-built communities around them.

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Through these decentralized communities, the value of a given DeFi project and its token can be assessed. A strong community indicates a human commitment in space, not just a symbolic outcry.


All information on our website is published in good faith and for general information purposes only. Any action taken by the reader on the information found on our website is strictly at your own risk.

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