While the decentralised financial system may have begun with Bitcoin, blockchain technology, especially Ethereum, is turning the ground-breaking concept to reality.
Decentralised finance (DeFi) is an emerging movement disrupting the financial sector. It aims to create a financial eco-system free from censorship and central authorities.
15 Ethereum-based projects led the charge in 2018, and the movement continues to grow rapidly. Of all the existing DeFi apps today —which includes projects, wallets, analytics, and more— a select few are standing out from the crowd.
MakerDAO and Compound Finance: Top DeFi Apps to Watch
Cryptocurrency IS Decentralised money, but Ethereum’s DeFi apps are revolutionising ways to lend, save, borrow, invest, and use that money. These decentralised finance apps, also called dapps, are designed to replace and enhance many of the functions provided by traditional banks.
Unlike these banks, however, DeFi apps will not charge excessive fees and censor transactions. They will also not force users to share sensitive personal information or conduct other severe breaches that are disturbingly common among these institutions.
According to cryptocurrency news sources and experts, these dapps leading the way for DeFi innovations:
MakerDAO uses Eth as collateral, which essentially makes it a crypto-collateralised, USD-pegged stablecoin. It is one of the most successful dapps today.
Unlike conventional loans, MakerDAO users do not need a bank account or a credit history to borrow money. All they need is Ether and a compatible wallet to generate Dai, which is MakerDAO’s currency. Users can utilise Dai to pay for expenses, leveraged trading, and anything else a loan is typically used for.
MakerDAO’s Dai allows users to track all their transactions, unlike TUSD, Tether, and other stablecoins. This prevents many stablecoin issues, such as non-transparency and difficulties in getting bank accounts.
- Compound Finance
Next to MakerDAO on the top dapps list is crypto lending marketplace Compound Finance. Compared to older lending markets, such as OKEx and Bitfinex, Compound Finance does not have a monopoly over the currency. This dapp uses smart contracts, a blockchain technology software, to manage the funds.
Compound Finance designates a money market, which is based on smart contracts, for each asset. The app pools all loans, therefore enhancing liquidity for all of its supported coins.
Lending and borrowing on Compound Finance mean being able to withdraw assets anytime and without concerns about the loan. The crypto in these money markets is completely fungible, so there is no need to negotiate periods and loans.
Users can also get a much higher interest rate on a Compound Finance savings account, which can reach up to 11% on the DAI. This is a significant sum compared to the 2.3% interest rates of traditional savings accounts. Compound Finance offers a better way to lend, save, and borrow money compared to conventional currency markets.
MakerDAO and Compound Finance are only two of the pioneering applications blazing the way for decentralised finance. There is also Uniswap, a more modern version of ShapeShift crypto exchange, and InstaDapp, an umbrella dashboard for the top dapps.
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Decentralise finance IS still at its earliest stages, but DeFiPulse is already valuing the top 17 DeFi apps with over $500 million total estimated worth. If you are interested in investing in decentralised technology, DeFi and promising blockchain technology providers are a great place to start.
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