Decentralized Finance or DeFi, this has been a term everyone has been talking about in the blockchain and crypto space for quite some time now recently. I’m pretty sure everyone in the crypto space have heard about DeFi because of how quickly it sprung up. Decentralized Finance or DeFi as we all like to call it, is simply decentralizing the financial system.
It means giving power and control to people rather than being controlled by a central authority which is what we seen in the financial system currently. DeFi is basically the direct opposite of what the centralized financial system is all about. DeFi at the moment has shown that it has all it takes to disrupt the current financial system and bring full decentralization to the users.
A lot of the elements of the current centralized financial system is already present in the DeFi space and has proven to work effectively and efficiently as well. When we talk about DeFi, we talk of a secure and decentralized blockchain, we talk of decentralized exchanges also known as DEX, we talk of lending and borrowing, we talk of interests, we talk of staking, etc.
There are so many components of DeFi at the moment that is already disrupting what the current centralized financial systems are doing. Talking about DeFi, there are a lot of projects who have taking it upon themselves to take DeFi forward and to the next level. Some of the projects which are doing amazing things in the DeFi space at the moment are;
Maker
Maker is a DeFi that has been around for a while now… It is one of the big players in the DeFi ecosystem at the moment. Maker is built on the Ethereum blockchain and utilizing Ethereum’s features and decentralized capabilities. Basically what Maker is, is a lending platform that is decentralized and permissionless.
Holders of the Maker token becomes part of the maker’s ecosystem governance and given them stakeholder position in the ecosystem. When we talk about Maker, another to coin that comes to mind is DAI which is what maker’s value is tied to. DAI is one of the top stable coins at the moment and maker is responsible for the creation and stabilization of DAI by simply from an overcollateralized loan and repayment system that is handled by the Maker’s smart contracts.
Compound
Compound is another DeFi project that prides itself as one of the top projects in the DeFi space at the moment. Compound focuses on lending and borrowing in the Decentralized Finance space and I have to say, as far as lending and borrowing is concerned in DeFi, Compound is definitely one of the top names that is mentioned. In simple terms, Compound is a lending and borrowing ecosystem that uses DeFi protocol on the blockchain.
Like every other DeFi protocols out there, Compound has its own token called COMP which gives holders the ability to take part in the governance of the Compound ecosystem. The users in the Compound ecosystem can receive interests based on set APY as lenders by supplying their tokens to certain money markets. Money markets for particular cryptocurrencies like ETH are created by Compound.