DeFi is using blockchain technology to ensure that our financial system is fully decentralized, distributed, and secured, unlike traditional means. In reality, it’s one of the fast-growing sectors in the crypto space.

Feeling intrigued? Let’s check out some of the popular decentralized finance applications on the market that you can try out today. So, let’s start!

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What Are Decentralized Finance Applications?

Before we start looking into DeFi applications, I’ll briefly explain the concept behind Decentralized Finance. DeFi is a peer-to-peer finance system or network that is powered by decentralized technologies. In simple terms, it’s actually the shift from a centralized and traditional financial system to a more decentralized and peer-to-peer network.

Decentralized finance companies are bringing an entire ecosystem full of applications starting from borrowing and lending platforms to tokenizing assets. So, in this case, decentralized finance applications are nothing more than blockchain or distributed applications developed specifically for the financial industries.

Also, most of these applications are using Ethereum as the underlying technology. In reality, our traditional financial system mainly runs on centralized infrastructure, which is highly flawed. On the other hand, decentralized finance applications get rid of the issues that come from the centralized infrastructure. So, it’s a great approach to digitizing this sector without any issues with the legacy systems.

Therefore, if you only have an internet connection, you can access all these Defi apps built to streamline all your financial needs. The breakthrough of DeFi is really changing the scenario of our financial systems. Now we can use crypto assets in so many ways that were never possible with real-world currencies. The paradigm shift in the economic infrastructure presents us with a lot of opportunities and gets rid of risks and trust issues.

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Best Decentralized Finance Applications in The Market

From synthetic assets to DAOs, decentralized finance companies are unlocking opportunities for a completely new economic model around the world. More so, the vesta mount of use cases of this sector is proof that this is more than just a bunch of DeFi projects.

It’s an integrated effort to develop a complete ecosystem of finance that shifts from traditional centralized services. Therefore, let’s look at the best-decentralized finance applications to understand what benefits you can expect from these.

So, let’s start!

Asset Management

Decentralized finance applications will help you be the sole custodian of your information. Therefore, it includes managing your crypto asset as well. Many crypto wallets will help you securely and efficiently interact with applications for selling, buying, transferring, and earning interest on your assets.

So, in the DeFi projects space, you will own your data, not any third parties or any government agencies.

• MetaMask: MetaMask offers the security and usability needed for a getaway to blockchain applications. However, it’s also a wallet, and it can handle account management along with connecting any individual to the blockchain. More so, it even offers hardware wallets, which is totally isolated from the site.
• Gnosis Safe: Using this application, you can fully customize and manage all your crypto assets. It even allows you to store them on multiple devices. For example, it offers EOA-based wallets, hardware wallets, paper wallets, or even a combination of these three.

Compliance and KYT

Basically, in the traditional finance companies, know-your-customer guidelines help counter-the-financing-of-terrorism (CFT) and promote anti-money laundering (AML). However, as the system is fragile, hackers can hack through the system and easily bypass all the security protocols.

Therefore, DeFi takes this system to a new height. Without focusing on customer identities, they are focusing on customer addresses. So, instead of know your customer, the applications focus on know-your-transactions (KYT). This helps to prevent risk in real-time and gets rid of any options for financial crimes.

• Codefi Compliance: This application offers KYT processes that help businesses to assess any risky behaviors from the very start. Therefore, it can offer CFT and AML checks to identify any fraudulent activities or even terrorisms.
• KYC-Chain: KYC-Chain is another application that offers you an array of features. You will get KYC and AML checks, identity and verification, crypto wallet AML, scalable and secure network, and access to the Selfkey network.

DAOs

DAO is actually a decentralized autonomous organization that focuses on decentralized and transparent business models. Basically, these types of organizations are based on blockchain technology and are incredibly different from traditional organizations.

Anyhow, there are applications that focus on managing financial operations, fundraising, and maintaining decentralized governance in DAOs.

• Maker: MKR holders actually governs the MakerDAO protocols. And this will include adjusting policy for Dai, improving governance, selecting different collateral types, offering security and transparency.
• Compound: Compound is also another application for DAO, where the decentralized community is the COMP token holders. More so, they can propose or even vote on upgrades related to the primary protocol.

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Data and Analytics

Decentralized finance applications come with unprecedented transparency for network activity and transactional data. That’s why using DeFi protocols can help you in data analysis, discovery, and profound decision-making opportunities. The explosive popularity of these applications is leading to the development of various dashboards and tools. In reality, some of them can even help you assess any platform risks, track the value of your assets, and compare them for the liquidity process.

• Codefi Data: Codefi Data is a suite for data management and analytics. You can use this solution in the investment ecosystem, such as public blockchain tokens, digital assets, decentralized finance protocols, and so on. Other than this, it also offers performance metrics and security.
• DeFi Pulse: It’s a DeFi live tracker. Here, you can find all the latest rankings of DeFi protocols and their analytics. Typically, they track the total value that is locked into the smart contacts of these applications.

Derivatives

Using Ethereum based smart contracts, DeFi is now introducing a new type of tokenized derivatives. Usually, these derivatives are directly linked to an underlying asset, and the performance shifts based on that asset.

More so, you can use DeFi derivatives to represent any real-world bonds, currencies, commodities, and even cryptocurrencies.

• bZx: It’s a margin lending protocol based on Ethereum blockchain. Furthermore, you can use this application to build other platforms that offer borrowing, lending, and trading facilities. So, even if you are a borrower or lender, you will be the one in control of the keys.
• dYdX: dYdX is a great application that will let you trade, borrow, lend, and even manage your assets directly. More so, you can use your crypto holdings as collateral for borrowing other assets. Tracking your performance and your assets is quite easy as well.

Infrastructure Development

Applications of decentralized finance offer composability. In reality, it means that it allows different components within a system to easily communicate, connect, and interoperate. Using this technique, communities are building upon what other developers have already built, making it one of the most prominent and powerful networks at this moment.

You can think of building DeFi applications like building with Legos. There are lots of tools dedicates specifically to the infrastructure development of blockchain platforms. More so, these are definitely some of the best tools that developers tend to love for their blockchain solutions.

• Truffle Suite: Truffle Suite is a combination of development tools that will let you create a new infrastructure from scratch. It contains three tools for compiling, testing, debugging, and deploying – Truffle, Ganache, and Drizzle.
• Infura: Using Infura, you can immediately connect your application to their APIs and use their support for interface to run your app. The best part is that you can do it with only 1 single URL. More so, they offer management services so that you can focus on project development.

Decentralized Exchange

Another popular use case of DeFi is the well-known decentralized exchange applications. Mainly these are cryptocurrency exchanges that don’t need any central authority. More so, it allows users to transact directly with other peers and ensure that the control remains only to the users. Thus, it helps to reduce any price manipulation, any kind of theft, or hacks.

Furthermore, these decentralized exchanges offer liquidity for certain projects, mainly when it comes to rival centralized exchanges.

More so, some exchanges may use decentralization to a certain extent without fully getting rid of the centralized servers.

• AirSwap: AirSwap is a great peer-to-peer trading decentralized finance application. In reality, it uses Ethereum as the underlying technology. More so, you won’t need any fees, deposits, or sign-ups to trade. It also offers a secure and easy to use interface that promotes liquidity of the assets.
• Uniswap Exchange: This is also based on Ethereum and offers automated liquidity protocol. The formula they use is quite unique, and they use non-upgradeable smart contracts for that. Therefore, you can access trusted intermediaries, great security, censor resistance, and prioritize decentralization using this.

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Gaming

Decentralized finance applications are in the gaming world as well. More so, using these applications, gamers can now unlock the opportunity to handle their in-app purchases without any risks of credit card hacks. More so, these applications now offer unique incentive models, which is hard to come across in typical gaming experience.

This will surely enhance your gaming experience without worrying too much about your finances.

• PoolTogether: It’s an audited savings game where there is no-loss for you. Additionally, it uses Ethereum to make it completely decentralized. All you have to do is use Dai to get tickets from the pool. Every single Dai in the pool will get interest, so it’s a win-win situation for everyone.

Borrowing and Lending

Borrowing and lending use one of the most prominent use cases for the applications of decentralized finance. In reality, users can lend their cryptocurrencies to a lending pool and earn interests based on that. Based on their criteria, many applications match the borrower and lender, getting rid of any trust issues along the way.

• Aave: It’s an open-source protocol that creates different kinds of money markets. Here, you can earn interest based on your borrowing and depositing assets. More so, depositors are responsible for increasing the liquidity, and borrowers can borrow any asset in undercollateralized or overcollateralized fashion.
• Dharma: Dharma offers a suite of developer tools and smart contracts that helps in lending and borrowing crypto-assets. More so, the application offers access to 2000+ tokens, where you will need no Gas fees for trading. You can even withdraw anytime you want.

Identity Management

You can pair applications of decentralized finance with blockchain-based identity systems to give users access to a global economic platform. More so, this will help users get access to their own identity and use it as portable identification whenever they need it.

On top of this, you can expect high security for your financial information and your personal documentations because no third party can get access to it. You can even choose to share partial information to your clients without disclosing your personal data.

• Civic: Civic is a decentralized identity ecosystem. Here, you will have to verify your identity once, and then you can use it as much as you want. Furthermore, you can choose which company you trust to share your information. So, you don’t have to overshare anything else.
• uPort: At uPort, you will be getting a self-sovereign identity with just a few clicks. In reality, this tool will offer any individual to share their data in a secure, simple, and private way. It comes in two variations – the public and private sectors.

Insurance

DeFi is surely talking over the insurance industries as well. Due to the lack of proper management and security, this sector deals with contract breaches and false insurance claims. Also, the process of insurance claiming takes a lot of time. That’s why a number of innovative decentralized application in this spectrum is using blockchain to protect and cover contracts and help to streamline insurance claims faster.

• Etherisc: DIP Foundation supports the ecosystem, and it contains oracle providers, product builders, resellers, risk pool keepers, claim adjusters, underwriters, and relayers. Anyhow, it’s a great application for building risk transfer solutions solely for the insurance industry.
• Nexus Mutual: Nexus Mutual is a unique application that gets rid of the concept of insurance companies. Here, you can share the risk with other parties in a pool without needing any company to back it up. More so, they offer a backup solution for any disaster like faulty smart contracts or DAO hack.

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Margin Trading

In reality, margin traders can borrow funds from a lender and utilize their trades in a typical finance system. However, in DeFi, this trading is fully decentralized and offers non-custodial lending protocols. Due to the fact that smart contracts are connected to the majority of this type of application, many call them “autonomous money markets” at the moment.

• Fulcrum: Fulcrum is a decentralized finance application for tokenizing margin trading and lending processes. It doesn’t need any KYC and AML, and it offers non-custodial solutions. The automated renew and no rollover fees help to maintain a seamless experience.
• DDEX: DDEX offers instant borrowing, interest in lending from the start, and 5x leveraged trading. More so, all the smart contracts are audited and secured along with accessible mobile devices.

Stablecoins

Stablecoins fall under the spectrum of DeFi as well. Mainly these are cryptocurrencies, but they are pegged to any kind of stable asset. It can be fiat money, or gold, or even other cryptocurrencies. In reality, stablecoins are here to reduce the volatile nature of cryptocurrencies and make them a good source of digital currency. At present, many central bank digital currency (CBDC) protocols are using stablecoins.

• Dai: Dai is a stablecoin that is pegged against USD. Here, 1 Dai = 1 USD. The stablecoin uses Ethereum based platform, and MakerDAO is governance behind it. In reality, there is no discrimination when it comes to Dai as it offers stable pricing all the time.
• Gemini Dollar: Gemini Dollar is also pegged against the U.S. dollar. Here, it’s in a 1:1 ration to USD. More so, it offers high scalability and usability in any environment, getting rid of all volatile nature of traditional cryptos.

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Online Marketplaces

Online marketplaces are another great use case of DeFi. The applications of decentralized finance help users exchange products directly without any third party. More so, it also promotes globalization when it comes to online marketplaces. You can even do freelance gigs on these applications if you want to.

• Gitcoin: Gitcoin is a marketplace for your development work. It’s an open-source marketplace, which means all your development work here will be for the public. It offers workshops, a growing environment for your projects, and certain payouts to help you keep contributing.
• Ethlance: It’s a different take on the blockchain, which is kind of similar to popular platforms like Upwork, Fiverr, etc. But instead of getting paid in money, you will get paid in Ether. At the moment, they are not taking any cut from your payouts, so any money you are making from it is completely yours.

Payments

Well, the primary use case of the DeFi application starts off with a peer-to-peer payments system. That’s why most of the best decentralized finance applications offer this functionality to all the users. In reality, blockchain technology is more than enough to ensure a secure and direct connection to other users without needing any third-parties.

But DeFi payments takes it to a whole new level. It’s creating a more open space for safely sending and receiving payments around the globe.

• Request Network: It’s a payments network that uses IPFS and Ethereum. Anyhow, using this application, you can get access to standards, infrastructures for building your very own payments project.
• Groundhog: Groundhog is an awesome toolbox developed specifically for creating subscriptions that are crypto-based. In reality, adding Groundhog to your application is a simple task with only a few lines of code. More so, you can transfer money to this wallet using any crypto wallet or a bank account.

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Prediction Markets

There are many applications of decentralized finance solely built for prediction markets. In reality, these applications can easily analyze the data and consumer behaviors to successfully predict any changes.

In any case, market prices can indirectly indicate certain events. Thus, these applications analyze the situation and can offer you the results around the economic event, election results, and even sports games.

• Augur: Who doesn’t like prediction market apps? Augur is now one of the leading prediction market applications on the market with no limit to what you can bet on. It totally is up to you on how much you want to bet on.
• Gnosis: Gnosis is rather a platform that lets you develop prediction market solutions based on Ethereum. So, it’s more of a developer’s tool where they can get access to resources, information, and financial infrastructures.

Synthetic Assets

These are more or less related to stablecoins. In reality, these assets are a mixture of other assets such as fiat money, gold, or cryptocurrencies for offering a stable value. For example, a certain percentage or fiat money and gold can make up a synthetic asset.

Furthermore, this process helps to absorb any price shock that may happen later in the future. So, if the prices of gold fluctuated, the fiat money can back it up and make the end value stable.

• Synthetix: Synthetix is a unique application that offers a mixture of various assets for a stable value asset. At present, it’s the backbone of derivatives trading with synthetic assets. Anyhow, Synthetix Network Token backs up every single asset on the application.

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DeFi Applications Are Changing the Future of Our Economy

DeFi apps are slowly but surely changing the economic model of the world. Even a decade ago, imagining a completely decentralized finance system was impossible. However, blockchain technology is slowly paving the way for offering us the next technological revolution. Although these applications aren’t perfect, these are still managing to replace the error-prone legacy systems.

*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post 30+ Best Decentralized Finance Applications [Updated] appeared first on 101 Blockchains.

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Understanding the Involvement of Ripple with DeFi 

Ripple has become one of the leading contenders to become a big player in the domain of decentralized finance. It has a crucial role in promoting DeFi with the facility of important tools and infrastructure required to develop new DeFi projects. You can notice that the XRP Ledger and the Ripple Transaction Protocol or RTXP have served as building blocks for various DeFi applications. Supporters of Ripple claim that the platform has been a prominent contributor to the growth of the DeFi ecosystem. 

Ripple Protocols that Support DeFi 

Ripple relies on the Ripple Transaction Protocol and the Ripple Protocol Consensus Algorithm for transferring fiat currency and digital currency across borders. The protocols serve a distinct role in providing cost-effective and faster cross-border payments. 

You can find clear answers to ‘What is a DeFi in Ripple?’ by exploring the functionalities of the Ripple Transaction Protocol. It is an open-source protocol that uses the XRP ledger to support cross-border payments. The RTXP protocol serves a unique consensus mechanism, IOUs, pathfinding algorithm and gateways. IOUs represent the debt obligations between gateways and users and help in facilitating transactions. Gateways are the reliable currency exchange entities that serve as entry and exit points for transactions in the Ripple network.

The Ripple Protocol Consensus Algorithm is a consensus process that uses the design of Practical Byzantine Fault Tolerance algorithm. Nodes in the Ripple network that participate in the consensus process are validators. Validators should hold a specific amount of XRP tokens as security deposit in the network. It offers a more secure and lightweight consensus mechanism that can support DeFi operations. 

The most promising protocol of Ripple that will have a crucial role in developing DeFi solutions is the Interledger Protocol or ILP. It is an open-source protocol that empowers transactions between different ledgers and payment networks. ILP leverages different components such as connectors, conditional payments, cryptographic unlocking mechanism and routing protocol. The components help in ensuring interoperable, secure and efficient transactions between different payment systems, thereby serving as the ideal option for DeFi.

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Unraveling the Reasons to Pursue DeFi Development on Ripple

DeFi developers are likely to trust the Ripple blockchain for DeFi development as it offers different appealing advantages. An overview of the reasons for which developers select the XRP ledger for DeFi projects can help you understand how Ripple will be the next big thing in DeFi.

The XRP ledger is public and decentralized with the open-source capabilities allowing anyone to build on the ledger. The ledger is maintained by the Ripple community that provides support to DeFi developers. Companies, validators, users and developers in the Ripple community work together to enhance the XRP Ledger for DeFi.  

Another promising trait of Ripple that supports DeFi development is the assurance of streamlined development. You can notice how the XRP ledger encourages innovation with multiple projects emerging in the Ripple ecosystem. On top of it, Ripple also provides different tools along with documentation that simplify development and reduce time to market. 

The most interesting reason to build DeFi projects on the XRP Ledger of Ripple is the assurance of better performance. Ripple has gained significant popularity for faster transaction settlement within seconds. The transaction speed of Ripple is one of the reasons for which it is the popular choice for cross-border payments. 

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Discovering the Utility of XRP Ledger in DeFi Development

The XRP Ledger provides tools and targeted innovations that speed up development and help in reducing time to market. It can serve as a valuable platform for creating a diverse range of DeFi solutions. You must know about the notable tools offered by the XRP Ledger to support DeFi development. The tools on XRP Ledger are classified into two categories, infrastructure and developer tooling. The infrastructure tools provide the basic foundation for creating DeFi solutions while developer tools help in adding distinctive functionalities. 

• Infrastructure Tools on XRP Ledger 

You can notice the DeFi Ripple connection clearly in the different infrastructure tools available on the XRP Ledger. The infrastructure tools such as Bithomp, Gatehub, XRP Toolkit, XRPL.org Ledger Explorer, OnTheDex, XRPL Rosetta, Towo Labs and XRPScan. Each tool serves distinct functionalities that can help you create efficient DeFi applications with Ripple.

Bithomp is a specialized XRPL explorer and toolkit employed in different cryptocurrency exchanges. It was created in 2015 with the objective of offering a user-friendly XRPL explorer. 

Gatehub is also another explorer tailored for the XRP Ledger. It helps in tracking the issuances of Gatehub on the XRP Ledger. 

XRP Toolkit offers a dedicated platform to manage crypto assets and trading activities on the decentralized exchange of XRP Ledger.

XRPL.org Ledger Explorer is the preferred block explorer for the XRP Ledger that can offer transparency into the DeFi apps. 

OnTheDex serves as a trusted source of information on live feeds of XRPL token activity. It provides the information about XRPL token activity to other aggregator sites. 

XRPL Rosetta offers a promising infrastructure tool to create DeFi apps that can offer visualization of fiat data on the XRP Ledger.

Towo Labs is also a crucial infrastructure provider that helps in developing XRP Ledger and Interledger infrastructures. It primarily focuses on simplifying non-custodial crypto management. 

XRPScan is the explorer and analytics platform tailored specifically for XRP Ledger. The platform offers a simple and transparent approach to view information about accounts, transactions and ledgers. 

• Developer Tools on XRP Ledger

The involvement of Ripple in decentralized finance also becomes evident due to the facility of developer tools on XRP Ledger. You can find tools such as Cryptum, Evernode, X-Tokenize and tools by 3ZY Labs. Let us find out what each tool has to offer for DeFi projects.

Cryptum is a powerful API/SDK platform that supports the integration of the XRP Ledger with any application, thereby enabling DeFi development.     

X-Tokenize serve as a powerful command line tool that can ensure a simpler process for development, management and distribution of tokens on the XRP Ledger. It also plans to introduce facilities to create and distribute NFTs on the XRPL.

Evernode has emerged as a powerful resource for DeFi development. It is a scalable and permissionless layer 2 smart contract network developed on the XRP Ledger. The most important highlight of Evernode is the flexibility that is a must-have for DeFi solutions. 

The most interesting player offering developer tools on the XRP Ledger is 3ZY Labs. It has developed SaaS solutions that blend web2 and web3 technologies along with marketing to improve user experience in DeFi. The platform plays a major role in ensuring secure and trustless DeFi transactions on the XRP Ledger.

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Serving a Powerful Decentralized Exchange 

The XRP ledger stands out as a promising platform for DeFi development as it leverages the capabilities of the world’s oldest decentralized exchange. You must know that the DEX has been working continuously since the launch of XRP Ledger. The exchange serves as a testament to the Ripple prediction associated with DeFi development. The decentralized exchange helps in buying and selling crypto tokens with minimal fees that works perfectly for DeFi solution. It is important to note that the decentralized exchange of XRP Ledger includes multiple currency pairs. The DEX also offers transparency with on-demand tracing when users have to make transactions.

Another notable feature of the XRP Ledger that supports DeFi development is the ability to make cross-currency payments. Cross-currency payments in the XRP Ledger provide a strong reason to boost DeFi activity. It is also important to note that cross-currency payments on XRP Ledger can deliver a variable amount in a specific sending limit. 

Final Thoughts 

The use of Ripple for developing DeFi applications will focus on algorithmic trading, facility of decentralized exchanges and tools. You must note that Ripple blockchain offers infrastructure and developer tools with the XRP Ledger along with a decentralized exchange to support DeFi activities. It is also important to note the benefits of XRP Ledger for developers such as faster transactions, open-source development and dedicated community.

As the speculations about involvement of XRP Ledger in CBDC development continue gain momentum, DeFi developers may also search for opportunities. The functionalities of tools offered by XRP Ledger offer proof of the fact that Ripple is a strong contender for developing DeFi solutions. Discover more insights on the functionalities of Ripple as a suitable choice for DeFi development right now.

*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

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Exploring the Power of DeFi on Cardano

Cardano is a promising choice for development of DeFi projects as it has a collection of successful DeFi projects. You can find asset management platforms, accelerators and launchpads in the Cardano DeFi ecosystem that showcase the proof of the abilities of Cardano to support DeFi projects. The DeFi ecosystem of Cardano also provides multiple decentralized exchanges, housing projects and decentralized lending platforms. Anyone can use ADA, the native currency of Cardano, for staking in the Cardano blockchain and earning rewards from different Cardano DeFi projects.

Interestingly, there is no specific consensus on the best DeFi project on Cardano blockchain. You can discover multiple best projects in the Cardano DeFi ecosystem according to your requirements. The ideal DeFi Cardano projects for you will depend on your needs, cost and important parameters for usability. Even the most popular DeFi project on Cardano might not be the ideal pick for you. Therefore, you should review all the options in the Cardano DeFi ecosystem before commitment to a specific project.

One of the most formidable aspects of the DeFi ecosystem on Cardano is the Cardano DeFi Alliance. It is a consortium for Cardano DeFi projects that focuses on creating certain standards for best practices in the Cardano DeFi ecosystem. The consortium also develops DeFi standards in Plutus, the smart contract language of Cardano. The other objectives of the Cardano DeFi Alliance include development of Plutus protocol security infrastructure and open-source projects and tools. 

Enroll now in the DeFi Development Course to understand the best ways to use DeFi development tools like Solidity, React, and Hardhat.  

Exponential Growth in DeFi TVL of Cardano Blockchain

The foremost highlight of Cardano blockchain that signals the possibilities of a promising future for DeFi is the growing TVL. The TVL or total value locked in the Cardano DeFi ecosystem has reached almost $700 million, which is the all-time high for Cardano. According to notable DeFi data aggregators, the Cardano blockchain has been capitalizing on the existing bullish sentiment in the market. The future of DeFi on Cardano might bring positive news as the blockchain added more than $400 million to reach its all-time high. It is a huge change for Cardano that witnessed a drop in TVL that brought the DeFi ecosystem TVL to almost $50 million after the collapse of FTX exchange.

TVL is generally the first indicator for measuring the trust in a DeFi ecosystem and its performance. You can use TVL as a trusted metric for measuring the appeal of a blockchain network in the crypto space and DeFi industry. The growing TVL of Cardano indicates a rise in confidence of investors in its DeFi ecosystem. Apart from the increase in TVL, the decentralized exchanges of Cardano also reported higher trading volumes. The founder of Cardano believes that the rise in trading activity on Cardano DEXs showcases proof of the growing adoption and progress of their DeFi ecosystem.

Role of the Price Rally of ADA in the Growth of Cardano DeFi

The growth of decentralized finance on Cardano blockchain is not limited to the rise in DeFi activities. The ADA token of Cardano has become one of the top performers during the current bullish run in the market. In the last week of November 2024, ADA gained over 20% and crossed the $1 mark. The momentous growth of ADA presents promising news for DeFi future on the Cardano blockchain. The price rally of ADA has pushed the market capitalization of Cardano to more than $40 billion.

It is also important to note that the price rally comes at the perfect moment as Cardano introduced different ecosystem advancements. The innovative developments have promoted sustainable growth of Cardano alongside strengthening its command over the crypto space. Cardano has been through a transition to decentralized governance that has boosted the prospects for enabling productive DeFi transactions on the network. On top of it, Cardano blockchain has successfully tested the first zero-knowledge smart contract deployment with Halo2. 

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Impact of Zero-Knowledge Halo2 System on DeFi Growth

The implementation of zero-knowledge smart contracts on Cardano provides a perfect opportunity to drive the growth of DeFi. Zero-knowledge smart contracts help in verifying transactions without exposing any actual data. The most crucial advantage of ZK proofs for the future of decentralized finance in the Cardano ecosystem is the assurance of enhanced scalability and cost reduction. You can find answers to ‘Does Cardano have DeFi?’ as the most surprising factor about the Cardano blockchain. It has established a strong and varied ecosystem of DeFi projects with distinctive strengths. Zero-knowledge proofs can open the doors to mainstream adoption of Cardano DeFi projects and increase their visibility.

Cardano can provide better advantages than Ethereum, the preferred platform for DeFi projects, in terms of cost and scalability. You can notice that cost and scalability play a major role in the growth of a DeFi ecosystem. Lower costs of DeFi solutions in a blockchain ecosystem encourage more users to adopt the solutions. In addition, scalable DeFi projects can attract more users as the projects will not give in when transaction volume increases to a level where it can cause network congestion.

• Lower Costs

The ZK smart contracts on Cardano are the most unique features that will promote the growth of DeFi on Cardano. The ZK proofs impose minimal costs for locking and unlocking funds on the Cardano blockchain. You can lock funds for 0.16 ADA and unlock them for 2.03 ADA on Cardano with the new Halo2 proving system. Upon comparing with Ethereum, you will notice that the cost of similar transactions on Ethereum will be significantly higher. You can only imagine the cost of all those gas fees you have to pay for different cryptographic processes in the verification stages. 

• Enhanced Scalability

In terms of scalability, the future of DeFi on Cardano will leverage Halo2 to achieve more scalability. The Halo2 system has better scope to grow on the Cardano blockchain that utilizes the UTxO model for parallel processing. Cardano outperforms Ethereum with a transaction speed of around 250 transactions per second with more room for growth. On the other hand, Ethereum is still stuck at almost 15 to 30 transactions per second until it completely implements Ethereum 2.0.

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Capitalizing on the Benefits of a Bitcoin Bridge

The next big news about Cardano that indicates a promising future for growth of DeFi on the blockchain is the Bitcoin OS Bridge. Cardano aims to tap into the market capitalization of Bitcoin through the bridge with unlimited access to Bitcoin liquidity. The access to Bitcoin liquidity can help Cardano accomplish new wonders in the DeFi sector. It is important to note that Cardano can enjoy an early-mover advantage for capitalizing on the liquidity of Bitcoin for its DeFi ecosystem. The Bitcoin OS Bridge can help in using liquidity of Bitcoin for different DeFi activities on Cardano. The bridge will transform Cardano into a trusted gateway for Bitcoin owners to tap into the Cardano DeFi ecosystem. 

Bitcoin takes up almost 60% of the entire value of the crypto market. However, it is responsible only for a small fraction of actual on-chain activity as it is not tailored for complex transactions. Cardano provides better ease of programmability alongside enhanced scope for scalability, thereby making it the perfect choice to tap into the potential of Bitcoin in DeFi. The founders of Cardano believe that the integration with Bitcoin OS Bridge can help in developing an interconnected blockchain ecosystem. Experts have also pointed out that the bridge will encourage DeFi adoption by providing the advantages of the Cardano infrastructure and Bitcoin liquidity.            

Technical analysis also presents positive trends for DeFi future on the Cardano blockchain. The strong upward momentum for ADA token with respect to Bitcoin indicates that ADA will gain significant value. By pulling in a huge amount of Bitcoin liquidity, the complete Cardano ecosystem can tap into benefits of DeFi functionalities powered by the Bitcoin OS Bridge.

Want to explore in-depth about DeFi protocol and its use cases? Enroll now in the DeFi Intermediate Level Course

Final Thoughts 

The prospects for growth of decentralized finance in the Cardano ecosystem revolve around technological breakthroughs in the Cardano blockchain. Cardano has recently adopted zero-knowledge smart contracts that provide the assurance of better security, privacy and scalability while reducing costs. It is also important to note that the native token of ADA has been leveraging the bullish market sentiment. As the value of ADA token grows, the market capitalization of Cardano has reached almost $40 billion. Another promising innovation that will power the growth of Cardano DeFi ecosystem is the Bitcoin OS Bridge. The Bitcoin OS Bridge opens the doors to tap into the liquidity of Bitcoin in the Cardano DeFi ecosystem. Learn more about the DeFi ecosystem of Cardano to explore the unique highlights of Cardano DeFi projects now.  

*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post The Future of Decentralized Finance (DeFi) on Cardano appeared first on 101 Blockchains.

DeFi, or decentralized finance, has been responsible for the transition of conventional processes in the domain of finance toward decentralized networks. Businesses can build a DeFi app for different reasons, including the development of new financial services solutions and offering new methods for conducting financial transactions. The most interesting thing about DeFi is the broader scope of opportunities associated with it. One of the major objectives of DeFi is the removal of intermediaries and emphasizing technology above everything else. Let us find out how you can build DeFi apps from scratch in the following DeFi development guide.

Enroll now in the DeFi Development Course to understand the best ways to use DeFi development tools like Solidity, React, and Hardhat.

What are DeFi Applications?

One of the first things that you should learn about decentralized finance development is the utility of DeFi apps. Decentralized finance or DeFi points at financial instruments, including services and applications developed on blockchain. DeFi solutions were created as an alternative to the traditional banking sector and to replace traditional financial services with modern technologies with the help of open-source protocols. Decentralized finance works with the help of blockchain technology and smart contracts to offer more transparent and accessible financial solutions. DeFi offers opportunities for interaction with cryptocurrencies, digital assets, and NFTs. 

Imagine the possibilities of having a world where financial services are immediately accessible at your fingertips. You don’t have to worry about any central authority directly intervening with your data. The demand for a DeFi development guide has been increasing as more people and businesses want to tap into the potential of DeFi. Decentralized finance utilizes blockchain to offer a borderless approach in the domain of finance. You can take a loan, speculate on price shifts, obtain secure risk insurance, and trade in digital currencies with the help of DeFi.

Learn about DeFi applications and how these work with the presentation on Top 5 DeFi Applications

Important Traits of DeFi Application

DeFi apps work by using blockchain technology, which offers a decentralized network that takes information in the form of blocks. The data blocks or blocks of transactions are chronologically arranged on a chain with the help of timestamps. As a result, the information becomes immutable, and the transactions become irreversible. The responses to “How do I start a DeFi development?” would also suggest that you must know the ways in which blockchain ensures public accessibility of the network. It can ensure the dependability and transparency of transactions associated with DeFi. What are the other aspects that separate DeFi applications from the crowd?

• Decentralization

Conventional financial frameworks have ruled the domain of finance. You can learn the DeFi development guide to create solutions that can address the setbacks of centralized finance. The most critical setback of centralized finance is the involvement of central entities or institutions in the management and regulation of financial transactions. With the help of decentralization, DeFi apps reduce the dependency on intermediaries. It can help in creating an ecosystem that revolves around the elements of trust and transparency. Users can gain control over their transactions and remove potential setbacks with the help of DeFi.

• Interoperability

Another important trait of DeFi apps points to interoperability, as DeFi protocols can interact with each other. It could help offer feature sharing, straightforward asset trading, and data exchange. Interoperability opens the doors for developing compound applications in which DeFi protocols can capitalize on the attributes of other protocols. As a result, interoperability empowers the rise of perspectives on developing a tightly knit and diverse DeFi ecosystem.

• Non-Custodial Control

The next crucial aspect you must understand to build a DeFi app is the assurance of non-custodial control. DeFi applications allow users to have non-custodial control over their assets. It means that users would have complete authority and ownership over their funds in all financial transactions. DeFi apps rely on smart contracts to ensure that users are in control of their assets.

• Programmability

DeFi applications utilize smart contracts that operate on blockchain networks. Smart contracts serve an important role in the automation of financial transactions and other tasks for DeFi. Developers can use autonomous smart contracts to enable complex financial tasks. In addition, decentralized finance development ensures that all financial operations work seamlessly. Furthermore, smart contracts can also adapt to different types of circumstances and requirements for offering financial services.

• Liquidity Provision

The list of distinctive traits of DeFi apps also draws attention to the capability of DeFi apps for liquidity provision. DeFi platforms help users in depositing their assets in liquidity pools to obtain reward tokens or interest. The pooled resources facilitate liquidity to the DeFi platforms to enable borrowing and seamless trading operations. With a decentralized approach, the liquidity provision in DeFi apps is considerably different from traditional finance methodologies.

What are the Important Functionalities of DeFi Apps?

The most notable highlight of a DeFi development guide is the description of the functionalities you need in DeFi apps. Apart from the benefits of independence and decentralization, DeFi applications can help in serving a broad range of applications. The use cases of DeFi prioritize the transformation of conventional financial processes. Here is an outline of the different functionalities of DeFi.

• Stablecoins

Stablecoins represent a stable group of assets in the DeFi landscape. The riskiest trait of any cryptocurrency is the higher volatility, which creates confusion for investors. Stablecoins work by pegging their value to reserve assets, which makes them one of the most revolutionary crypto assets.

• Tokens

DeFi tokens mined on pre-existing blockchains are also an important aspect you would come across when you learn DeFi development best practices. In addition, DeFi tokens can be pegged against an underlying asset, such as fiat currency or gold.

• Liquidity Mining

Liquidity mining is also an important highlight in the DeFi ecosystem. Also known as yield farming, it involves the use of cryptocurrencies to facilitate liquidity. For example, decentralized exchanges utilize Automated Market Maker to facilitate effective regulation of trading activities. Users can swap tokens for trading cryptocurrencies in the liquidity pool to earn passive income.

• Exchange

DeFi exchanges can help users in trading cryptocurrencies without the involvement of third-party intermediaries. The DeFi exchange apps leverage smart contracts to enable peer-to-peer and direct trading.

• Staking

The functionalities of DeFi also include staking, which utilizes idle coins to support the validation of cryptographic transactions. You must learn that staking is possible with the Proof of Stake consensus that focuses on ownership stake rather than the proof of work.

• Borrowing and Lending

People who want to find answers to “How do I start a DeFi development?” must also pay attention to the functionalities of borrowing and lending in DeFi apps. DeFi has been creating different alternatives to traditional finance use cases, and lending and borrowing apps are one of the top examples of this. Smart contracts serve as the technological intermediary in such apps, thereby ensuring that the lenders and borrowers follow all the conditions.

• Wallets

The DeFi ecosystem also includes wallets as one of the notable additions for exploring a different perspective on decentralized finance. Cryptocurrencies are still in the initial stage and need central authorities, such as a digital wallet. Digital wallets are responsible for holding the key in the process of exchanging cryptocurrencies. DeFi wallets could help users exercise complete control over their assets and keys.

Catch up on the latest trends in DeFi and its connection to crypto with Decentralized Finance Skill Path

Steps to Develop a DeFi App from Scratch

The growing popularity of DeFi development has invited attention to the creation of innovative DeFi solutions. You should learn how to build a DeFi app from scratch by following the best practices recommended by experts. Here are some of the essential steps you must follow to create a DeFi app.

Please include attribution to 101blockchains.com with this graphic. <a href='https://101blockchains.com/blockchain-infographics/'> <img src='https://101blockchains.com/wp-content/uploads/2024/04/Steps-to-Build-a-DeFi-App.png' alt='Steps to Build a DeFi App='0' /> </a>

• Identification of the Use Case

The first step in the process of developing a DeFi app is the identification of the use case. Why do you want to create a DeFi app? DeFi serves a broad range of use cases, including lending and borrowing, DEXs, DAOs, yield farming, and stablecoins. You should establish a niche to develop DeFi apps according to user requirements. Effective identification of the use cases of your DeFi app helps in defining the architecture of the app.

• Choose the Right Tech Stack

The next crucial highlight in the process of decentralized finance development is the selection of the tech stack. You must pay attention to the selection of crucial components for essential functionalities of the DeFi app. First of all, you must choose the blockchain network on which you have to develop the DeFi app. Ethereum is one of the most popular blockchain protocols for DeFi development. On the other hand, Polygon and Solana have also emerged as notable protocols for developing DeFi apps. 

You must also emphasize other aspects such as smart contracts, decentralized storage, development tools, frontend and backend frameworks, and UI development tools. The tech stack to build a DeFi app involves the use of smart contract development tools such as Solidity programming language and development frameworks such as OpenZeppelin, Truffle, Hardhat, and Ganache. 

It is also important to pick an alternative for decentralized storage, such as IPFS, that can provide scalable and secure storage. The development tools for DeFi include web3.js and web3.py libraries. On top of it, you would have to rely on frontend development frameworks such as React and backend development frameworks such as NodeJS and Java. DeFi development projects also require database technologies in the tech stack, such as NoSQL, PostgreSQL, and MySQL. You must also emphasize the web3.js or ethers.js frameworks for UI development.

• Definition of App Architecture

You should provide a clear definition of app architecture after determining the tech stack for DeFi development. Developers seeking answers to “How do I start a DeFi development?” must define the low-level and high-level architecture of DeFi application. In addition, the architecture defines the frontend and backend functionalities alongside offering clarity on how smart contracts ensure governance for financial transactions. You must also outline the functionalities and features that you want in the DeFi app to support desired use cases. 

• Develop the UI/UX

User experience not only focuses on the aesthetics of the app but also on mapping the journey of a user to ensure effective engagement. During the design of UI, developers must consider the ways in which users can access different functionalities and features. Developers must create sketches of user flows to design the ideal user interface of DeFi apps that can help in performing the primary tasks. You must also emphasize functional usability testing to ensure that DeFi apps offer an inclusive experience to all users.

• Emphasize the Security Posture

The security posture of DeFi apps is one of the biggest concerns for a developer. You have to pay attention to essential best practices for ensuring security as you learn DeFi development. Developers should pay attention to carefully scripting the code for smart contract development. In addition, you must also release the patches for developing intelligent contracts and implementing vulnerability assessments.

Want to explore in-depth about DeFi protocol and its use cases? Enroll now in the DeFi Intermediate Level Course

Final Words

The development of decentralized finance solutions has emerged as a formidable highlight in the cryptocurrency landscape. It is important to understand that decentralized finance development is an essential priority in the emerging web3 landscape. DeFi solutions can offer a decentralized alternative to conventional financial services with multiple value advantages. The conventional approaches to providing financial services have been plagued with a wide range of issues, including censorship and lack of transparency. You can explore diverse use cases of DeFi to create innovative solutions that can transform the financial services landscape. Learn more about the fundamentals of DeFi and discover the ideal path to create your first DeFi solution right away.

*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post DeFi Development: Guide to Building DeFi Applications appeared first on 101 Blockchains.

Crypto and DeFi bear markets could reduce portfolio value. Most important of all, bear markets also have the tendency to last longer than the expectations of users. However, the good thing for investors in the bear market is the opportunity for re-focusing and spending time on research for projects that could gain momentum in bullish markets. 

The continuous development of the DeFi and crypto market leads to the inevitable occurrence of bear markets. The bear market definition finance systems put forward in the 2022-23 market indicate the negative impact of bear markets. With the formidable price drops in major cryptocurrencies, such as Ethereum and Bitcoin, bear markets can lead to losses for investors.

On the other hand, it is also important to know that the downward trends would reach the lowest point before the bull market begins. Experienced crypto investors could monitor the important metrics and indicators that can guide them toward the next Bull Run. Let us learn more about the top DeFi metrics that can help investors in a bear market.

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What is the Necessity of DeFi Metrics in Bear Markets?

The importance of DeFi metrics in bear market could help in understanding their role in driving investors toward better decisions. Metrics could help investors and analysts identify the beginning of a robust and effective cycle. The common highlights that determine the effectiveness of DeFi projects in bear markets include technical factors, on-chain activity, and supply dynamics. On top of it, the profit/loss metrics could also provide a detailed impression of the effectiveness of DeFi projects.

The technical aspects of a DeFi project point towards its performance according to popular technical benchmarking tools. On the other hand, on-chain activity could showcase the positive trends in network utilization and on-chain activity. Furthermore, supply dynamics could also help in identifying the saturation of coin supply in the ownership of long-term owners. The bear market for DeFi has been characterized by radical drops in prices of native tokens of DeFi projects. In addition, it is also important to learn about the metrics for DeFi market that can help in identifying when the next bull market would happen.

Enroll now in the DeFi Development Course to learn about the functionalities of automated market makers and liquidity pools in DeFi solutions.

Top DeFi Metrics for Bear Market

The primary aim for using DeFi metrics in a bear market is the opportunity to invest in the right projects that could perform well in bullish market conditions. What are the best DeFi metrics in bear market conditions? Here is an outline of the top DeFi metrics that could help you through a bear market.

• Use Case of the DeFi Solution 

The DeFi sector has many projects that promise huge returns and feature protocols with multiple gimmicks. However, only a few projects have successfully delivered products that have high demand and deliver effective utility. One of the most important bear market definition finance sector has put forward is the impression of failing projects. On the other hand, you can use the most important metric for DeFi projects to determine their effectiveness in bear markets. Irrespective of the market conditions, DeFi solutions can withstand the downward trends if they have a proven utility.

You should determine whether the DeFi project has some form of utility. It is important to look for DeFi projects that solve a pressing concern. DeFi projects with a proven utility could stand the test of time in any market condition and could prepare for long-term survival. 

• Exchange Inflows 

The next metric required for evaluating DeFi solutions in a bear market is the exchange inflows. The flow of native DeFi tokens transferred on exchanges can provide a clear impression of investor sentiment. You can find answers to “What is bear market DeFi?” by checking how the native tokens perform on different exchanges. The increasing inflows would mean that investors want to sell their tokens due to bearish sentiment. On the other hand, declining exchange inflows could imply that asset holders want long-term storage, thereby suggesting that the bear market is declining.

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• Competitive Advantage of the Project

The utility of a DeFi project is not the only thing that would guarantee its survival in a bear market. However, the best way to understand bear market for DeFi would involve a study of the unique advantages delivered by the project. It is important to find out how the protocol performs in comparison to other projects which offer solutions for the same problem.

Does the DeFi project offer simpler or better solutions than competitors? For example, DeFi oracles have become one of the common entries among new protocols in the DeFi market. However, users are likely to choose the oldest and most prominently integrated Oracle solution or Chainlink, which is one of the strongest competitors. 

• Cash Reserves

The list of indicators for checking the performance of DeFi projects in bear market also includes cash reserves. Every DeFi project must have a treasury that could help it survive the downward trends in the bear market. Cash reserves are an important metric for DeFi projects, which provide yield on locked assets that can encourage liquidity. 

The DeFi metrics in bear market would also point to the role of cash reserves for obtaining adequate liquidity for surviving an extended bear market. You should look for a DeFi project that has a massive treasury featuring different types of assets such as Bitcoin, Ether, and other stablecoins such as Tether and USD Coin.

The massive, diversified, and well-funded treasury could help in pulling the DeFi projects through tough times. DeFi projects should learn when they should take profits and should not use one token for majority of the protocol’s treasury. 

Want to explore in-depth about DeFi protocol and its use cases? Enroll now in the DeFi Intermediate Level Course

• Clear Roadmap

One of the most prominent techniques for determining the effectiveness of DeFi projects in a bear market is the roadmap. A DeFi project does not have a chance at success just because it has a clear roadmap. You should know that past performance does not provide an indicator of future results. 

However, a DeFi project must consistently follow its roadmap and meet important deadlines. The performance of a DeFi project in fulfilling its roadmap could help you identify how it can endure tough times. You could use tools for monitoring the frequency of developer activity on DeFi protocols. If the project does not maintain consistency in fulfilling the roadmap deadlines, then it might be a rug-pull project.

• Market Volatility 

You can find extreme levels of volatility in a bear market for DeFi and crypto projects. Prices go on a downward trend, and volatility reaches peak levels during the bear market. Stabilization and decline of volatility readings in a bear market would imply that the bear market is gradually easing. In addition, it also provides a trusted indicator that shows how markets are embracing support mechanisms to facilitate recovery.

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• Market Sentiment Survey

The most crucial metric in the domain of DeFi points to the sentiment about the project in a market. You can use large-scale surveys to learn more about the inclination of investors and experts about DeFi projects. Sentiments that could indicate fear point at the downward trends, and improvement in optimism could support recovery from bear markets.

• On-Chain Transaction Value 

The outline of best DeFi metrics in bear market would point at the on-chain transaction value. With the total USD value of transactions on a DeFi solution, you can monitor the token velocity and overall network usage. Growth of on-chain transaction values following a bear market shows that the project has been performing effectively for organic adoption.

• Social Sentiment

The social sentiment around a DeFi project would also serve as an important metric for bear markets. Investor psychology also plays a major role in defining the way a DeFi market works in bear conditions. You can track social media posts and communities to obtain insights about crowd sentiment for DeFi projects. It is important to check whether the social sentiment about a DeFi project can shift from fear and anticipation towards optimistic trends.

Want to explore an in-depth understanding of security threats in DeFi projects? Enroll now in DeFi Security Fundamentals Course

• Trading Volume 

The trading volume of DeFi projects also serves as a prominent DeFi metrics in bear market with an impression of its effectiveness. Higher trading volumes indicate that the project has been gaining engagement. On the other hand, it also implies that market participants have been showcasing interest in the DeFi project. DeFi projects with stronger trading activity could imply more conviction.

On the other hand, unstable trading volume could imply that the project has been falling prey to the bear market. It is also important to review the bear market for DeFi projects on the basis of derivatives activity. An increase in derivatives trading activity could imply that the DeFi project has prepared for the end of a bear market.

• Miner Capitulation 

You can also refer to miner capitulation as an important metric for DeFi projects during a bear market. For example, Bitcoin miners could stop their operations when they face a decline in profitability. Therefore, all-time lows for hash rate and rebound in mining activity suggest that miners look forward to the situation of recovery. 

• New Influx of Capital

The most important metric for a bear market definition finance projects could show in a time of recovery is the influx of capital. You should notice that on-chain analysis provides an estimate of the evaluation of realized profit and loss. It is a difference in the value of coins at disposal, as compared to the value during the time of acquisition.

The ratio of realized profit to loss can offer oscillator tracking to prove whether the aggregate volume of realized profits can surpass the volume of realized losses. The ratio of realized profit to loss could help in identifying larger macro shifts in the profitability of DeFi markets. In addition, the volatility of markets could lead to false positives. However, they can be accounted for in the large-scale shifts in the DeFi market. 

• Foundation for DeFi Success

The foundation for a DeFi project also serves as a crucial metric in bear markets. A DeFi project could establish a robust foundation for a bear market when a larger volume of supply should be exchanged at lower prices. The trend implies the expulsion of sellers alongside an equal influx of new accumulation demand. One of the earliest indicators, such as macro trend reversal in strong foundations, emerges in the form of sharp changes in the percentage of the total supply in profit. Interestingly, the trend is triggered by a relatively small increase in pricing.   

• Confidence of New Investors

The most important addition among the best DeFi metrics in bear market points to confidence of new investors in the recovery trend. Observation of the spending patterns of new investors could help in showcasing the confidence of new investors in DeFi projects. One of the practical methods for evaluating the metric for confidence of new investors is the comparison between the values of unrealized profits in newly acquired and HODLed coins and the profit realized from spent coins. In simple words, the metric would evaluate the difference between cost basis of short-term holders that are spending and the ones that are holding.

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Conclusion 

The bear market in the DeFi sector has created an environment of uncertainty for investors. However, comprehensive research and careful selection of DeFi metrics in bear market could help in finding the ideal ways to navigate the DeFi market. It is important to look for the DeFi projects that have been gaining the attention of new investors, have a clear roadmap, and fulfill important deadlines.

In addition, you must also look at the metrics such as trading volume and on-chain transaction volume. On top of it, you can also utilize metrics such as social sentiment and market sentiment for DeFi projects in bear markets. Learn more about DeFi and find out the best practices for finding your way through a bear market scenario.

*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post Which DeFi Metrics Are Useful in a Bear Market? appeared first on 101 Blockchains.

It is an inherent risk for DEX trading, which requires proven and tested solutions. Slippage is the price difference between the quote price of a cryptocurrency and the cost you pay for it. Slippage on popular decentralized exchanges, such as Uniswap, could be a formidable challenge for users. 

The most common question in the mind of an on-chain trader is “how to avoid slippage in trading,” and the answer lies in understanding slippage. You should understand the reasons for which slippage happens in decentralized exchanges. In addition, you should also identify the different scenarios in which slippage happens on decentralized exchanges. Let us learn about the best practices to avoid slippage with an in-depth understanding of its impact on DeFi users.

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A Simple Example for Understanding Slippage 

The fundamental concepts of DeFi slippage explained for beginners would reflect on how the price change of an asset happens during execution of a trade. For example, you place a trade for buying 30 units of cryptocurrency for 1 ETH according to the quoted price. However, you might receive only 29 units of the cryptocurrency by the time the trade is executed. The difference of 1 unit is the outcome of slippage. 

Slippage is also a common highlight in traditional markets. However, the effects of slippage are prominent in decentralized exchanges. On the other hand, a successful slippage trading strategy could help you avoid the risks of slippage. You could develop such strategies with a formal understanding of slippage and the factors that lead to slippage.

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What Are the Reasons Behind Slippage?

Slippage is the measure of difference between the quoted price for a trade and the final price of the trade at the time of execution. It is a mandatory feature in all financial markets due to the delay between the time when a trader sends a transaction and the time when it is executed. The fluctuations with slippage crypto trading would point to the fluctuations in the market price of assets during the time required for completing a trade. 

Decentralized exchanges offer a quoted price according to the existing market conditions. However, the trader could also set a slippage percentage they are willing to risk for the trade. If the slippage percentage exceeds the specified range, then the transaction will revert, and the trade will be canceled.   

Slippage could vary between positive and negative according to the market movements. Negative slippage implies bad news for traders, and positive slippage obviously fetches a better trade for DEX users. The answers to “What is DeFi slippage?” would also showcase the important factors that cause slippage. Here are the factors responsible for slippage on decentralized exchanges. 

• Block confirmation times.
• Liquidity for the token pair in the trade.
• Trading volume. 
• Design of Automated Market Maker of the DEX.

Let us find out the role of these variables in slippage for decentralized exchanges. 

• Block Confirmation Time

The block confirmation time is the duration of time between sending a transaction and its confirmation. How does block confirmation time affect slippage calculation for DeFi users? You should note that even the fastest transactions on Ethereum take 13 seconds for confirmation. Layer 2 chains and other blockchain networks could also offer faster block confirmation times. 

However, the delay of seconds can result in a marginally higher increase in slippage. Remember that the crypto market is highly volatile, and prices of assets change within seconds. The silver lining for avoiding problems due to block confirmation time is to use more gas for faster confirmation of trades. 

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• Liquidity of Token Pair

Majority of on-chain traders would know that token pairs with low liquidity could lead to high slippage. What is the impact of liquidity on slippage trading with a specific token pair? Most of the decentralized exchanges utilize the variant of a 50/50 liquidity pool design along with a price curve. Interestingly, large trades have the potential to introduce instability in the liquidity pool, thereby leading to slippage. Slippage is one of the big problems for token pairs that go through large price swings. 

• Trading Volume

The trading volume on a DEX is also another prominent factor responsible for slippage. You must understand the different scenarios for slippage in DeFi due to fluctuations in trading volume to create secure trading strategies. For example, higher trading volumes could imply requirement of more time for block confirmation. As a result, traders could find massive changes in price of trade between the time of sending and time of confirmation. 

• Design of AMMs in Decentralized Exchanges

The design of the decentralized exchange is also another crucial factor responsible for slippage in transactions. Price curves and different conditions for liquidity, alongside other implementation practices, could determine the extent of slippage. The answers to “how to avoid slippage in trading” also involve the explanation of working mechanisms of Automated Market Makers. AMMs work with a formula for establishing the price of multiple assets deposited in liquidity pools. The ratio of assets in the liquidity pool helps in determining the price of the asset. 

The Automated Market Maker mechanism ensures that users can trade assets without any available counterparty. With an AMM in the design of a DEX, users would not need market makers for the trade. Traders could deposit the asset they want to sell and withdraw the corresponding amount of the asset they want to buy. The slippage crypto working mechanism is also visible in the formula used for pricing assets in AMMs. 

The classic AMM model utilizes a mathematical function for determining the price of an asset. It is also known as a Constant Product Market Maker Model and utilizes the function (x*y=k), and the ratio of assets in the liquidity pool could help in governing the price. In addition, slippage also happens due to subtle fluctuations in asset prices during the transaction confirmation time. 

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Effects of Slippage 

Another crucial highlight in the explanation for slippage would point to the impact of slippage. Traders need a detailed introduction to DeFi slippage explained in simple words to identify its effect on the overall profit or loss in trades. Slippages could appear as minor burdens for traders. However, they could add up over the course of time, and the impact of slippage is clearly visible in the case of large trades. 

Let us assume that the trading price of BTC is $20,000, and a trader assumes that it would increase by around 5% in the next few hours. The trader would assume a profit target of 5% at $21,000 and a 2.5% stop-loss at $19,500. How does slippage calculation come into play in this case? You need to take the thousands of other traders into account who look at the price of BTC and come up with the same conclusion. The traders place their buy orders at the same time, and the price of BTC would move up by, let’s say, 2%. Therefore, the order placed by the first trader would be executed at $20,400 rather than $20,000. 

Did you notice how slippage affected the entire structure of the trade? The trade was supposed to be a low-risk and high-reward trade. Slippage turned the tables and transformed it into a high-risk, low-reward trade. The impact of slippage trading affects not only the trading structure but also the trader. What would the first trader in the example do in this case? The trader is most likely to make mistakes such as early exits or making adjustments in profit target or stop-loss. Any unplanned move on behalf of the trader could increase the chances of failure of a transaction.

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Scenarios for Slippage in Decentralized Exchanges

The introduction to slippage would include more than the responses to “What is slippage in DeFi?” and the factors that cause slippage. At the same time, users should also know about the specific scenarios where they can encounter slippage. Here is an outline of the two scenarios where you could expect slippage in decentralized exchanges. 

• High Trading Volume

You learned how trading volume is a crucial factor for determining slippage in a decentralized exchange. When a liquidity pool receives a large order that it cannot handle, it leads to slippage. Liquidity pools obtain their price points for tokens on the basis of ratio of assets in the pool. How do large trades create instability in liquidity pools? 

The large size of the transaction could withdraw a massive share of one asset and add another asset for significant changes in the ratio. You can find the slippage crypto equation as a general highlight in uncommon pairs with pools for low-liquidity protocols. Low-liquidity protocols do not have enough liquidity to maintain the price of assets for a high-volume transaction.

In addition, decentralized exchanges are hosted on blockchain networks such as Solana, Ethereum, and Binance Smart Chain. Therefore, decentralized exchanges would take some time to process transactions rather than ensuring instant transactions like centralized exchanges. 

• Regular Trading

The next important scenario for slippage calculation involves regular trading. Even high-liquidity pools are not immune to slippage. It is an evident phenomenon for liquidity pools with popular asset pairs such as ETH-BTC. Why? The lack of instantaneous transactions on DEX creates difficulties for traders.

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Best Practices for Avoiding Slippage

As you can notice, the price slippage could happen in the time gap between the time of sending and confirming the transaction. When the blockchain has more transactions, miners will prioritize the transactions that pay more gas. Let us find out the different ways to reduce the problems due to slippage. 

• Pay More for Faster Transaction Approval

Slippage is a common concern with limited block space alongside higher transaction volume. Therefore, transactions with low gas estimates would fall back in the line for hours. The longer duration for confirming your transaction could lead to concerns due to price changes during the same time. 

Therefore, you can rely on slippage trading mechanisms like using more gas for your transaction. You could avoid such situations by getting your transaction approved before any changes in market prices. On top of that, you should remember that using more gas does not mean that you have to use double the gas amount. Faster transaction approval with more gas could leave little room for slippage. 

• Use Layer 2 Solutions

You can also find how to avoid slippage in trading by using a layer 2 solution. Using more gas could help you avoid slippage. However, it could lead to a more expensive transaction. With layer 2 scaling solutions, you wouldn’t have to pay more to obtain faster confirmation. 

Layer 2 scaling could offer faster and more cost-effective transactions than the ones on Ethereum. Layer 2 scaling solutions roll up Ethereum transactions and take them away from the main Ethereum chain. Therefore, you could find faster transaction confirmation with lower costs.

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Final Words

The impact of slippage in DeFi presents formidable concerns for traders. You should learn how slippage finds its way into DeFi solutions such as decentralized exchanges. As of now, DEXs are the most popular choices in the DeFi ecosystem. It is important to learn about the different factors responsible for causing slippage. 

The notable factors underlying slippage include trading volume, liquidity of the token pair, and design of AMM of the DEX and block confirmation times. With a clear understanding of the variables responsible for defining slippage, you can find the ideal trading strategies for avoiding slippage. Learn more about the impact of slippage by exploring the fundamentals of DeFi with credible training resources now.  

*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post Slippage in DeFi – Know Everything appeared first on 101 Blockchains.

The existing frameworks for digital identity follow a centralized approach, which leads to multiple limitations. Most important of all, digital identity is susceptible to a wide range of cybercrime attacks. Almost 71 million people in the US alone fall prey to cybercrimes, losing around $4,476 on average. On top of it, around 93% of Gen Z and 96% of baby boomers do not trust social media websites for security of their personal data.

The problems with existing digital identity systems have served as the foundations for the most popular decentralized identity use cases in different sectors. Centralized digital identity also creates issues in terms of efficiency and unauthorized use of power and control over digital identity systems.

For example, supply chain fraud is one of the biggest concerns for global business, and the primary causes include asset misappropriation schemes with fraudulent billing. Decentralized identity can serve as a promising solution to these problems alongside empowering users to control their digital identity. The following post helps you learn about some of the most notable use cases of decentralized identity and its significance.

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Definition of Decentralized Identity

Decentralized identity refers to an identity management system that enables users to control their digital identity without relying on a particular service provider. Digital identity represents the collection of information about a person, electronic device, or business with an online presence. How is decentralized identity important for the world right now?

Digital identity encompasses data such as search history, user names and passwords, buying history, and social security numbers. The relevance of questions like “What is the use case of decentralized identity?” is visible in the necessity of verifiable proof of existence for accessing different services. Apart from digital services, the digital identity of an individual is also a vital requirement for accessing essential services such as education, banking, and healthcare.

As a matter of fact, more than 1 billion people in the world don’t have access to banking services due to the lack of ‘identity.’ Decentralized identity systems use blockchain networks to offer simple and secure solutions to store and use their digital identity. Imagine being able to verify your age without revealing your date of birth. 

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What is the Significance of Decentralized Identity?

Decentralized identity provides a wide range of benefits and improvements over conventional centralized identity management systems. The first thing you would note in a decentralized identity example is the power for users to control their personal data. People could use identifiers, credentials, and data about their digital identity and store them in a digital wallet.

As a result, people could protect their privacy and improve security by reducing the possibility of data breaches with blockchain. The decentralized identity blockchain combination ensures that you don’t have to store personal data in a central database. Blockchain introduces decentralization and removes the risks of a single point of failure, as in centralized digital identity systems.

The benefits of decentralized identity also prove how it is important for organizations, individual users, and developers. Businesses could issue and verify immutable credentials and documents with immediate effect, alongside reducing the risk of data breaches by storing limited user information.

The examples of best-decentralized identity uses also prove that individuals could have better control over the privacy and security of digital identity. Developers could also ensure secure sign-in authentication for app users, which could eliminate the requirement for passwords and user verification with privacy safeguards.

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Use Cases of Decentralized Identity 

Government agencies need a digital identity as an important tool for verifying the identity of citizens. On the other hand, the conventional approaches for identity verification follow a manual, redundant, and time-consuming approach. Another important highlight of decentralized identity use cases is the ability to store identity information in a digital wallet owned by the individual. The advantages of decentralized identity also point to the flexibility for instant verification of identities through a distributed ledger.

Most important of all, use cases of decentralized identity have also ensured safeguards against identity theft. Interestingly, government agencies and organizations across different sectors have already started deploying decentralized identity solutions. Here are some of the most notable use cases of decentralized identity, which can revolutionize the digital identity landscape.

• Use Cases of Decentralized Identity in Healthcare

Healthcare agencies encounter a wide range of setbacks in the implementation of programs for family health. One of the notable problems with existing identity verification systems points to the need for more time to process documents. For example, the Supplemental Nutrition Assistance Program or SNAP requires applicants to fill out complex forms and provide personal information. 

Such types of examples emphasize the need for one of the most popular decentralized identity use cases in healthcare. Why? Applicants would have to provide personal data, such as data of birth, and financial information, such as income, bank accounts, and expenses. Therefore, it slows down the process alongside increasing complexity and costs.

The problem becomes more complicated with the SNAP program, as the eligible citizens for the benefits of SNAP also earn eligibility for other government services. The government services include Children’s Health Insurance Program (CHIP), Medicaid, and Temporary Assistance for Needy Families (TANF). In the case of traditional identity solutions, citizens would have to submit similar information for each program. At the same time, every program would have to allocate manpower, resources, and time for verifying information. 

The applications of top decentralized identity uses for such examples could point at solutions like faster validation. Rather than waiting for weeks, the programs could verify the identities of citizens with a single decentralized identity credential. For example, one program could verify the digital identity of a citizen, and it can be stored in the digital wallet, which is under the control of the citizen. Subsequently, citizens could share the same credential with other agencies for faster verification. According to the new approach, residents could easily access assistance without any delays, alongside saving time and resources for agencies.

• Decentralized Identity Applications for Business Services

The impact of cybercrime on government systems has been imposing formidable challenges in recent times. One of the examples of such cyber-attacks on government systems is the City of Oakland. Hackers compromised the business systems and temporarily shut down the licensing and permit portals. 

The decentralized identity blockchain combination could serve as a valuable improvement by removing a single point of failure. Decentralized identity leverages blockchain for managing information storage and exchange with the goal of improving efficiency and security.

The most important advantage of using a decentralized identity refers to the freedom from storage of data in a centralized location. Blockchain ensures that hackers never find a single point of failure, thereby making business services of government organizations less vulnerable. 

• Faster Access to Unemployment Benefits

The impact of the pandemic in 2020 on employment is still one of the prominent highlights in history. Unemployment levels increased at unprecedented rates, which were witnessed in the 1930s. At such a dire point of time, unemployment benefits serve as a major source of livelihood for many people. 

The responses to “What is the use case of decentralized identity?” in the case of unemployment point to easier accessibility of unemployment benefits. Individuals seeking unemployment benefits have to provide proof that they have been terminated from work. Just like the field of healthcare, the centralized identity systems of government agencies could take more time to process information about employment of applicants.

The traditional identity management systems of government agencies could take days or even weeks to process a single application. On the contrary, agencies could switch to blockchain and decentralized identity systems for faster validation of citizen requests for unemployment benefits. 

It could be one of the best-decentralized identity uses for improving the lives of citizens. Most important of all, around 80% of US citizens do not trust private agencies or public institutions for control over their data. Decentralized identity could offer the opportunity for residents to take control of their data alongside encouraging trust in the government.

• Essential Records Management 

The essential records or credentials include birth certificates, marriage certificates, death certificates, and other crucial documents. Citizens would need these documents for different types of transactions in their lives. For instance, a birth certificate is a mandatory requirement for social security number application, obtaining a passport, admission to schools and colleges, and receiving government benefits. 

In the case of existing identity management approaches, verification of personal information leads to storage of a copy of the personal data in different agency databases. As a result, citizens have their personal information at multiple points of attack, thereby making them vulnerable to fraud. 

The decentralized identity example for managing essential records could help in understanding how citizens could provide verifiable information without revealing their personal data. For instance, assume that a parent wants to secure admission into the local public school for their child. The parent has to prove that their child has reached the age required for registration in the school.

According to the existing systems, patterns would have to provide a copy of the birth certificate of the child. Now, the information about the child is in a database, which puts them at risk. With the help of blockchain, the parent could create a decentralized identifier that stores a copy of the birth certificate of their child. Therefore, the information about the child never goes into public domain. 

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Other Notable Use Cases of Decentralized Identity 

The guides for decentralized identity also emphasize transforming identity management in many other sectors. Here are some of the notable examples of decentralized identity use cases which have the potential to transform digital identity.

• Decentralized Finance

A decentralized identity could provide an effective resource for billions of people worldwide to access financial services and solutions. The applications of decentralized identity can help in reducing the need for traditional banks and centralized intermediaries. For example, financial institutions could utilize decentralized identity systems for automation of AML and KYC processes alongside improving speed.

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• Secure Voting 

The uses of decentralized identity for governments also focus on voting and elections. Decentralized identity could offer prospects for transparent and secure voting processes with complete anonymity. Therefore, the outline of most popular decentralized identity use cases focuses on how it can reduce the concerns of manipulation and fraud in elections. Decentralized identity could help transform the existing approaches to governance.

• Decentralized Social Networks

Social media is an integral part of the lives of every citizen accessing digital platforms. However, the existing social media networks are centralized platforms that have complete control over the data of users. For example, the images you post on Facebook or Instagram are stored in centralized servers, which are vulnerable to cybercrime. 

On top of it, social media platforms could use your images according to their objectives without your consent. Decentralized identity could help in sharing content and communicating with others without depending on centralized platforms for collecting and controlling user data.

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Conclusion 

The emerging applications of decentralized identity are prominent highlights in the existing technological landscape. At the same time, it is important to wonder whether the interplay of decentralized identity blockchain technology is a suitable replacement for existing identity management systems. However, the path of every new technology goes through innovation for improvement, and decentralized identity would also follow the same path.

The advantages of decentralized identity, such as more control over usage of personal data and ability to control their online presence. The evolution of decentralized identity technology would encourage different industries to adopt decentralized identity for offering secure, user-centric, and trusted data exchanges. Decentralized identity is a major component of web3, and it could serve as one of the major milestones in transformation of digital experiences. Learn more about decentralized identity and how it works right now.

The post Most Popular Use Cases for Decentralized Identity appeared first on 101 Blockchains.

As a matter of fact, every new technology has vulnerabilities, and it is only a matter of time before someone recognizes them. The most common smart contract security pitfalls, such as rug pulls and flash loan attacks, have affected various projects. At this point in time, it is reasonable to think about the sandwich attack, which emerged as a prominent threat. However, sandwich attacks have not gained popularity as rug-pull scams. 

The most common assumption about a threat you don’t encounter often is that it does not have the capability to harm you. On the contrary, sandwich attacks could create some of the most complicated situations within the DeFi landscape. Before you find out answers to “What is sandwich attacks?” you must note that Vitalik Buterin mentioned the attacks in 2018. Therefore, it is important to understand the basic principles underlying sandwich attacks and their potential impact. The following post offers you a detailed guide to sandwich attacks and their ramifications for the DeFi sector. 

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Definition of Sandwich Attacks

The first thing you must learn about sandwich attacks is their definition and the category of attacks they fall into. Sandwich attacks are a variant of front-running attacks in which exploiters place two transactions before and after a victim’s transaction. The primary target of DeFi sandwich attacks is decentralized exchanges or DEXs, which enable direct exchange of tokens from wallets. The attacker starts the exploit by monitoring all the pending transactions on the blockchain network. Subsequently, they find the largest or most profitable transaction they could exploit. How?

The attacker would place one transaction with a higher gas fee for jumping ahead of the victim’s transaction. It is also important to note that the transaction would purchase the same token intended by the victim in the transaction. As a result, the price of the transaction would become higher than the expectations of the victim. What are the factors responsible for forcing a user to pay more for transaction fees? The two most obvious answers to the question point to the higher demand alongside slippage, which is the difference between the estimated and actual price of transactions.

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How Does the Attacker Benefit from Sandwich Attacks?

The most crucial aspect for understanding sandwich attacks in DeFi is the viewpoint of the attacker. What does the attacker gain by placing a transaction ahead of the victim’s transaction? Now, you must know about the second part of the sandwich attack on the victim. The attacker would place another transaction after the user’s transaction, with a higher gas fee, to ensure immediate processing. After the victim’s transaction is completed, the second transaction placed by the attacker would sell the tokens bought in the first transaction at a higher price. As a result, the transaction would reduce the price of the token, and the victim would lose value on the transaction. 

Attackers would get benefits from the difference in the pricing of purchase and sale prices. The victim’s transaction suffers between two transactions of the attacker, thereby terming the attack a sandwich attack. 

Important Factors Associated with Sandwich Attacks

The basic example for describing the underlying principles of sandwich attacks offers a clear glimpse of price manipulation and front-running. You might be wondering about the reasons behind losses to the victim. One of the important aspects in the working of sandwich attacks is the Automated Market Maker mechanism. 

The AMM must work on rebalancing the exchange rate to maintain liquidity, as the attacker’s buy order takes up a large portion of liquidity from the pool. As a result, the victim would end up with a poor exchange rate as the attacker’s transaction front runs their transaction for earlier execution. 

In the second phase of sandwich attacks, the hackers use a big sell order to add liquidity to the pool. The increased liquidity would stabilize the exchange rate, which would help the attackers obtain a better conversion price for the tokens they bought in the first transaction. Prior to the sell transaction by the attacker, the victim’s buy transaction for the same token would have pushed up the price. Therefore, selling the same token would be profitable for the attackers. 

Most important of all, hackers also use sandwich attack bot and tools for executing sandwich transactions at unbelievably higher speeds. As a matter of fact, bots can help in executing the sandwiched transactions before the AMM can stabilize the exchange rates. One of the most popular examples of platforms that have been the biggest victims of sandwich attacks is PEPE. Let us learn more about the example of PEPE token network and how it has become the top spot for sandwich attacks.

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The Curious Case of Sandwich Attacks on PEPE Network

PEPE token is one of the most renowned examples of crypto tokens inspired by memes. However, the PEPE token network has been experiencing frequent issues with an increasing number of DeFi sandwich attack complaints and front-running. Interestingly, the PEPE network has also opened up new opportunities for expanding the use of bots for sandwich attacks. In the initial stages, the PEPE token network did not have significant volumes of liquidity, and many people did not know about the token. The PEPE token network shot to popularity after a tweet claimed that a PEPE bag bought at $250 had surged to a price of $1.5 million. 

The magic behind the tweet helped in pushing the optimism and hype around the PEPE token, thereby leading to a rise in the bag value. However, another address utilized a sandwich attack bot for front-running all PEPE buy transactions on the token network. Just like other instances of sandwich attacks, the frequent front-running led to an increase in the prices of PEPE tokens. 

The attacker also used bots to push up the prices of CHAD tokens. As a matter of fact, the attacker had spent more than $1.28 million in transaction fees across a 24-hour timeframe. Ultimately, the attacker claimed profits amounting to more than $1.4 million at the expense of traders who bought the tokens at high prices.

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How Can You Identify a Sandwich Attack?

The discussions about sandwich attacks also refer to the factors required for identifying sandwich attacks. You can notice how anyone with crypto expertise can fool you into engaging in loss-making trades. The interesting thing about such DeFi attacks is the simplicity and ease of performing such attacks. On top of it, the attackers could continue repeating the transactions without repercussions. Therefore, it is important to notice the distinctive traits expected in sandwich attacks to ensure your safety. 

First of all, you must remember that sandwich attacks target decentralized exchanges or DeFi platforms, which use Automated Market Makers. Some of the noticeable examples of such platforms include Uniswap, SushiSwap, PancakeSwap, and others. In addition, it is also important to note that the expectations of the trader regarding the execution price and the difference with the actual execution price influence the possibilities of sandwich attacks. Here are the two most common scenarios you can expect in sandwich attacks on DeFi platforms. 

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• Liquidity Taker vs. Taker 

The signs of a sandwich attack would be visible when liquidity takers compete with one another. You can identify examples of such scenarios in cases where a general market taker has pending AMM transactions on the blockchain. The attacker would initiate the front-running and back-running transactions on such transactions to obtain financial gain. It is important to note that the liquidity pool, alongside asset pairing, features three pending transactions. Therefore, miners would work on deciding the choice of transaction for first approval. 

When the attacker pays a higher transaction fee than the victim, the network showcases an inclination towards the malicious transaction. On the other hand, it is not an effective choice for a sandwich attack in practical scenarios. At the same time, it also suggests an explanation for the ease of implementing sandwich attacks.

• Liquidity Provider vs. Liquidity Taker

Liquidity providers could attack liquidity takers in a similar manner as other liquidity takers. Examples of such DeFi sandwich attack scenarios would involve the attacker removing liquidity as a method for front-running. The front-running increases the slippage for the victim, and then the attacker adds liquidity again for stability in the pool balance. Withdrawal of liquidity prior to the approval of the victim’s transaction could remove the commission fee for the concerned transaction. 

How Can You Fight Against Sandwich Attacks?

The mysterious nature of sandwich attacks with the complexity of combining front-running and back-running transactions can be confusing for users. How can you trust a DeFi project with safety from sandwich attacks? You can find your answers by reflecting on specific highlights in responses to “What is sandwich attacks?” and how to ensure user safety in DeFi protocols. The alarming fact about sandwich attacks is the fact that there is no specific solution for preventing sandwich attacks. 

On the contrary, users could follow some precautions to avoid the risk of sandwich attacks and reduce their exposure to attackers. Sandwich attacks are one of the unique additions among DeFi attacks as they are associated closely with the design and limitations associated with DeFi protocols and platforms. Here are some steps you can follow to ensure that no one fools you into becoming a victim of sandwich attacks.

• Pay the Higher Transaction Fees

More often than not, users think that they could put some transactions on hold and wait for the transaction prices to drop as they wait in the queue. Users have the freedom of choosing the amount of gas they want to pay for confirming a specific transaction on the blockchain network. The amount of gas paid for a transaction helps in ensuring faster confirmation and execution of transactions. 

Attackers have been using sophisticated tools like sandwich attack bot and target pending transactions at higher speed. On the contrary, you can escape the trap of sandwich attackers by paying higher transaction fees to confirm transactions. As a result, the attackers could not find an acceptable range of profitability with the trades. 

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• Bot Protection

The threat of sandwich attacks has become more complicated with the arrival of tools like bots for sandwich attacks. One of the trusted measures for safeguards against sandwich attacks is MEV protection services. The services use oracles, algorithms, or smart contracts for detecting and preventing sandwich attacks alongside reimbursing users for losses. However, the limited accessibility of such services creates a major challenge for users in leveraging their functionalities. 

• Look for Lower Slippage Tolerance

Another term that could save you from sandwich attacks is slippage tolerance. It refers to the maximum percentage of price fluctuation that a user can accept for the approval of their trade. For instance, if users set the slippage tolerance at 1%, the transaction would be canceled when the price increases over 1% from the time of initiating the transaction and its completion. Users can reduce the risks of a DeFi sandwich attack by lowering slippage tolerance to avoid paying more for their transactions. Lower slippage tolerance helps in increasing the chances of fighting against risks of price manipulation. 

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Conclusion 

The introduction to sandwich attacks showed that the domain of DeFi security problems is expanding at a rapid pace. It is important to learn about the significance of responses to “What is sandwich attacks?” beyond the superficial layer. You should identify how attackers target pending transactions on DeFi platforms such as decentralized exchanges. 

It is important to reflect on the different scenarios for sandwich attacks alongside understanding the role of liquidity in enabling such attacks. As the domain of DeFi awaits a broader scale of adoption in the event of failure of large centralized exchanges, security lapses due to sandwich attacks could present massive concerns for DeFi adoption. Therefore, it is time to learn more about sandwich attacks and explore potential solutions for them.

*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post A Detailed Guide to Sandwich Attacks in DeFi appeared first on 101 Blockchains.

In the long run, decentralized finance would influence millions of businesses worldwide by opening up new avenues for financial transactions. What is a DeFi exchange? Why would a startup need a DeFi exchange? In addition, you might also come across concerns regarding the best practices for integrating DeFi exchanges into an organization’s business network. The following post helps you find a detailed overview of how DeFi exchange development can support startups.

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Does DeFi Make a Difference for Startups?

One of the first things about evaluating the prospects for adoption of DeFi decentralized exchanges in startups would refer to the benefits. The benefits of DeFi exchange development for startups can provide a clear impression of the factors favoring DeFi adoption. DeFi introduced the possibility of earning the trust of customers by enabling merchants to offer decentralized and secure access to services. 

Customers are more likely to trust a startup featuring a DeFi exchange integration as it showcases the organization’s adaptability to new trends. Decentralized finance guarantees accuracy and transparency in recordkeeping for different types of transactions, lower transaction fees, and faster, easier transfers. As a result, DeFi serves the crucial value advantage of customer satisfaction, thereby ensuring better loyalty from customers.

The answer to “Is it worth launching a DeFi exchange startup?” would also refer to the gradual adoption of cryptocurrencies in mainstream payments. Decentralized exchanges have become the top choice of users, considering the assurance of better security than centralized exchanges. 

The benefits of DeFi exchanges for startups are only one aspect of the DeFi revolution for businesses. Startups should also evaluate the necessity for integrating DeFi into their operations and the underlying challenges. The journey of DeFi exchange development for startups would also focus on different use cases, thereby opening up new business opportunities. 

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Fundamentals of a DeFi Exchange

The foremost step for creating DeFi exchange development startups is an in-depth understanding of DeFi fundamentals and how it works. Have you heard of centralized exchanges? Decentralized exchanges are different than centralized exchanges by offering a peer-to-peer marketplace. The transactions on a DeFi exchange happen directly between users or traders without any third-party intermediaries, such as banks, mediators, or brokers. DeFi exchanges can help users connect crypto wallets directly to the DeFi exchange and swap the desired tokens without any issues. 

Decentralized exchanges can help in ensuring lower risk alongside avoiding the need for entrusting the custody of assets to another party. Therefore, the thought of launching DeFi exchange development startups appears as a promising choice right now. It helps in achieving the trust of customers alongside ensuring that products and services could offer the best value for money. Organizations could use DeFi exchange development as an important tool for building trust. For example, DeFi exchanges provide transparency in financial transactions alongside creating trustless environments. 

Customers are more likely to trust brands that offer better control over data. On top of it, DeFi exchanges offer the assurance of low fees as some platforms do not charge any commissions for money transfers. DeFi exchanges also deliver the advantage of confidentiality with secure storage of assets in smart contracts and vaults. On top of it, some DeFi exchanges also allow users to carry out financial transactions without revealing their identity. Therefore, customers can find better safeguards for their privacy in financial transactions. 

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Understanding the Technology behind DeFi Exchanges

If you want to start a DeFi exchange development startup, then you must know how the technology works. It is a new approach to transforming conventional financial systems with the help of blockchain and smart contracts. The responses to “Why startup start a DeFi exchange business?” also reflect on the removal of intermediaries and central authorities for creating an accessible and transparent financial ecosystem. How are blockchain and smart contracts useful in creating DeFi applications? 

• Blockchain Technology

First of all, you must notify the impact of blockchain technology, which offers a distributed and decentralized digital ledger for recording transactions in a network with multiple computers or nodes. The impact of blockchain technology on DeFi exchanges is visible in the benefits of security, transparency, and immutability. 

Transparency ensures open visibility of the financial services and transactions with a startup, thereby empowering user trust. On top of it, security through decentralization prevents the risks due to a single point of failure. Immutability of transactions on blockchain ensures integrity of all transactions on DeFi exchanges. 

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• Smart Contracts 

Smart contracts are another important component in the working of DeFi exchanges. The projects on DeFi exchange development for startups would need self-executing agreements among involved parties to enforce the predefined conditions automatically. Smart contracts could work wonders in the domain of DeFi with the assurance of multiple advantages for users. 

One of the most noticeable benefits of smart contracts points to automation of processes. Smart contracts can help simplify complex transactions through automatic execution of certain actions. The transparency and immutability of smart contracts on blockchain help in reducing the need for trust among users involved in financial transactions. Furthermore, smart contracts can also provide the advantages of lower costs of operation and significantly lesser transaction fees.

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How Can You Check Whether You Need DeFi Exchange Development?

The primary objective of DeFi exchanges for startups would point to how they introduce a new approach to serving customers. On the other hand, DeFi exchange development startups would have to evaluate different factors before implementation of DeFi solutions. Here are some of the noticeable factors you must take into account before thinking of a DeFi exchange startup.

• Industry and Market Trends

The first thing you need to take into consideration for DeFi exchange development would point at industry and market trends. You should evaluate the existing industry trends alongside the larger financial ecosystem to determine the relevance and popularity of DeFi in your industry. The review of adoption rates for DeFi solutions among competitors and new partners can help you determine whether you actually need a DeFi exchange for your startup right now.

• Alignment with Business Models 

The outline of important factors behind the decision to create a DeFi exchange for your startup would also focus on your business model. You must identify how the benefits of DeFi exchange development for startups can help in achieving strategic goals and present better value propositions. Most important of all, startups should check whether the new technology offers promising improvements in competitive advantage. 

• Operational Effectiveness

You should also pay attention to the existing processes of a startup alongside identifying the areas which enable streamlining of operations and reduction of inefficiencies. Startups can find promising improvements in payment processing, asset management, trading, and other financial services, thereby offering better user experiences. 

• Technical Feasibility 

The most crucial requirement in answering questions such as “Is it worth launching a DeFi exchange startup?” would refer to technical feasibility. Startups should check whether they have the required technical capabilities and infrastructure for effective integration of DeFi solutions. Does your startup have the technological foundations for effective integration of DeFi solutions? You must verify whether the existing technical infrastructure can help your startup capitalize on the true potential of DeFi exchanges.

• Risk Assessment 

The adoption of DeFi products would also focus on assessment of possible risks involved in DeFi integration. Some of the notable risks emerge in the form of regulatory and compliance challenges or security issues. In addition, you should also consider the impact of expenses for development and integration. Your risk assessment plan for DeFi exchange development for your startup must include a comprehensive cost-benefit analysis. The cost-benefit analysis must factor in the potential for savings in reduced operational overheads and transaction fees.

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What Are the Use Cases of DeFi Exchanges for Startups?

The development of DeFi exchanges could help startups with many valuable benefits. However, it is also important to identify the specific use cases of DeFi exchanges before building one for your startups. The decision for launching DeFi exchange development startups depends on the identification of opportunities and use cases with DeFi. Here is an outline of the different ways in which you can use DeFi exchanges. 

• Lending and Borrowing 

DeFi lending platforms offer the advantage of peer-to-peer lending without involving intermediaries. Therefore, startups can use DeFi to exchange business ideas for offering unique value propositions to lenders and borrowers, such as competitive interest rates and faster approvals. 

• Decentralized Exchanges

The most noticeable highlight in the answers to “Why startup start a DeFi exchange business?” would refer to the popularity of decentralized exchanges. The collapse of popular centralized exchanges such as FTX has fuelled massive growth in the demand for decentralized exchanges. Decentralized exchanges enable flexible exchange of crypto assets without depending on central authorities. DeFi exchanges can support improvements in the security and efficiency of transactions through cost reduction. 

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• Asset Management 

Decentralized finance exchanges can also enable startups to explore promising value advantages with asset management. The innovative solutions in DeFi exchanges for your startup would point to yield optimization strategies, decentralized asset pools, and automated portfolio management. DeFi exchanges can open up new investment opportunities as well as tools for improving the user experiences of clients.

How Do You Integrate DeFi Exchange in Your Startup?

The two recommended approaches for integrating a DeFi exchange in your startup point at creating a DeFi decentralized exchange from scratch and using an existing one. As web3 and decentralization become mainstream priorities in the business world, questions about DeFi exchange development startups would gain prolific momentum. 

If you want to create a DeFi exchange from scratch, you have to rely on a professional DeFi development company. On the other hand, the existing DeFi market offers you multiple choices for integrating DeFi exchange functionalities in your startup. You can rely on the following best practices for choosing the right DeFi protocols and platforms for your startup.

• Evaluate the Reputation and Track Record

The reputation of the DeFi protocols and platforms is the first thing you need to check before considering them for your startup. You should choose platforms or protocols which can offer the guarantee of credibility. You can check for a history of security, user experiences, and reliability with the platform to reduce the risks with integration. 

• Features

The next important aspect in the process of DeFi exchange development for startups would refer to the features of the DeFi protocols or platforms. You should ensure that the DeFi protocol is the suitable choice for your desired use cases. It is important to check whether the DeFi platform can address the specific needs and requirements of a startup from decentralized finance. For example, the DeFi platform should have the necessary provisions for scalability according to the growing demand for DeFi. 

• Security and Interoperability 

The analysis of security measures alongside privacy protections could help in evaluation of DeFi platforms and protocols. You should focus on choosing DeFi solutions with strong security features such as encryption, frequent audits, and multi-factor authentication. In addition, DeFi platforms should also ensure interoperability with other blockchain platforms, services, and networks for better flexibility. 

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Conclusion 

The multiple value advantages of DeFi would imply that launching DeFi exchange development startups is a profitable venture. At the same time, it is important to review the crucial factors which help in determining different ways to integrate DeFi into your startup. You can create new DeFi exchanges with innovative functionalities that empower the blockchain and web3 landscape.

The consistent expansion of the DeFi community offers favorable opportunities for growth to big businesses as well as startups. On the other hand, startups should also follow the best practices to navigate around challenges for integrating DeFi technology. Learn more about DeFi and the underlying tech stack for creating DeFi exchanges right now.   

*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post Why Startups Should Choose DeFi Exchange Development? appeared first on 101 Blockchains.

The best DeFi platforms, such as decentralized exchanges and peer-to-peer lending platforms, have become prominent topics of discussion in technology. DeFi platforms have grabbed the attention of experts in the blockchain and web3 landscape. At the same time, it is also important to look for emerging players in DeFi with innovative use cases. The fluctuations in the DeFi market might be a prominent cause of concern for beginners before investing in decentralized finance. 

How did the number of active DeFi wallet addresses grow continuously above 6 million in 2022? Experts point out that the top DeFi platforms capitalized on the failure of centralized exchange FTX. However, the transaction volumes on decentralized exchanges in January 2023 amounted to $56 billion, which was 27% more than the previous month. 

Another important metric for the health of the DeFi market is the Total Value Locked or TVL, which amounted to $75 billion in March 2023. The TVL may appear considerably smaller than the all-time highs in 2022 beyond $220 billion. On the other hand, DeFi token market caps achieved significant growth in comparison to the global crypto market capitalization. Let us find out the top platforms which could emerge as big names in DeFi in 2023.

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Why Should You Find the Top Platforms in DeFi?

Over the course of recent years, the DeFi revolution has ensured massive developments in the domain of finance. As the popularity of decentralized finance or DeFi protocols continues to grow further, users can access different types of financial services without relying on centralized intermediaries. 

DeFi solutions utilize the power of public blockchains and smart contracts to offer decentralized access to financial services, such as trading, lending, and borrowing. The most popular DeFi platforms, such as Uniswap, PancakeSwap, Aave, and Compound, are notable additions to DeFi solutions. The growth of DeFi platforms has also been responsible for boosting employment prospects. In addition, you can find other reliable DeFi platforms suited for distinct use cases. 

Which DeFi Platforms Would Attract Attention in 2023?

The list of DeFi platforms has been expanding continuously, with new additions featuring new functionalities. It is important to look for the best platforms and how users can leverage them to enter the DeFi industry. The following DeFi platform list helps you find the DeFi platforms which would have a major impact on users and the industry in 2023. 

1. Optimism

One of the prominent aspects underlying the growth in investments in DeFi is the trust of investors in the underlying layer 1 networks. However, scalability issues can hamper the operations of DeFi platforms with layer 1 networks. Therefore, solutions such as Optimism have evolved as promising solutions to the scalability problems for DeFi. 

Optimism helps in driving the scalability of Ethereum and has become one of the most promising layer 2 networks associated with Ethereum. It is one of the noticeable DeFi platform examples of layer 2 networks focused on achieving better user experience in dApps. Ethereum is the largest blockchain network, powering the web3 ecosystem and multiple dApps. On the other hand, Ethereum has also faced criticism for the problems with low speed and high cost. 

Optimism has emerged as a promising solution for introducing the capabilities of DeFi applications to millions or even billions of users. The DeFi platform offers the ability to process a large number of transactions with lower costs alongside ensuring the security advantages of Ethereum layer 1. Interestingly, the Optimism ecosystem has more than 30 protocols that offer different types of use cases for OP token owners. 

The responses to “Which DeFi is best for beginners?” would point to Optimism as you can find multiple solutions in one place. The Optimism ecosystem includes dApps, which are decentralized exchanges, cross-chain bridges, NFT tools, and many other trading tools. The Optimism network could also help users with seamless management of their cryptocurrency assets.

2. Metacade

Another interesting project which might attract the attention of the DeFi ecosystem in 2023 is Metacade. It is an innovative take on the blend between play-to-earn games and DeFi, with a broad range of services. Metacade is one of the best DeFi platforms in the industry right now, with the facility of opening up opportunities for DeFi in games. The platform offers multiple approaches for accessing gamified DeFi services, such as play-to-earn, compete-to-earn, create-to-earn, and work-2-earn. Metacade offers a comprehensive assortment of services you can access immediately. 

The platform features different play-to-earn or P2E arcade games, which offer rewards in cryptocurrencies. Casual gamers, as well as competitive professionals, could use the games in Metacade to earn rewards in the MCADE tokens. The interesting quality of Metacade as one of the top DeFi platforms is the assurance of user experience elements such as tournaments. 

On top of it, the DeFi platform also focuses on empowering and expanding the community through create-to-earn functionality. Metacade users could earn rewards in crypto for making valuable contributions to the community, such as sharing insights, game reviews, or latest news about blockchain games and industry trends. 

Another notable highlight of Metacade is the support for staking functionality. The staking feature could make Metacade one of the most popular DeFi platforms in 2023 with an immersive user experience. Staking could help holders in earning passive yield on their MCADE token deposits, which would build up gradually over the course of time. Subsequently, the asset would gain a generous annual percentage yield of APY estimate, which would lead to better exposure for the asset and improvements in return potential.

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3. GMX

The third addition to the list of DeFi platforms that would make an impact in 2023 is GMX. It is a decentralized exchange that offers support for spot trading as well as perpetual trading. GMX is an effective entry in the DeFi platform list, as users could trade on the platform with leverage. 

Interestingly, it does not require the KYC verification of users. On the other hand, it offers access to a broad collection of advanced trading tools across a specific decentralized trading platform. GMX has also been one of the resilient DeFi projects in price performance during the crypto winter in 2022. 

Following the colossal failure of a renowned centralized exchange like FTX, decentralized exchanges have become the top choices for investors. GMX has capitalized on the pressing demands of investors to grab a massive user base. It is one of the popular exchanges for cryptocurrency trading, with a robust decentralized protocol and intuitive user interface. GMX is one of the new DeFi platform examples which offers rewards to liquidity providers. 

The rewards for the liquidity providers on GMX are obtained from asset balancing, market making, and futures trading. The liquidity pools on GMX utilize different types of digital assets, which ensure easier accessibility of cryptocurrencies without interruptions in withdrawal. GMX follows a deflationary token omics model along with scarce asset supply, thereby implying possibilities for significant price growth with time.

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4. Synthetix

The outline of DeFi platforms you should try in 2023 should also include Synthetix. It has been hailed as one of the most promising DeFi projects by experts, with the assurance of the potential to deliver massive returns in 2023. If you are looking for answers to “Which DeFi is best for beginners?” you can try Synthetix. 

Synthetix serves as a liquidity provider protocol for DeFi platforms, which is an essential service for the DeFi ecosystem. As a matter of fact, different dApps such as Curve, 1Inch, and Lyra utilize Synthetix for offering liquidity to DeFi users and seamless service.

The most striking highlight of the Synthetix protocol is the facility of deep liquidity pools, which rely on minting synthetic assets for maintenance. Therefore, users could view the underlying digital assets without having to purchase the assets. DeFi users can leverage the benefits of improved exposure for additional value in financial services without compromising on liquidity for the concerned dApp. 

The reasons to add Synthetix among the best DeFi platforms also point to its ability to deliver liquidity to DeFi protocols on Ethereum and Optimism. As a result, multiple dApps could leverage the Synthetix protocol as a robust and secure answer for inefficiencies in the DeFi ecosystem due to liquidity issues.

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5. PAX Gold

PAX Gold is also another popular DeFi project which would gain the attention of users in 2023. It works by allowing users to purchase a fraction of gold by using cryptocurrency, which has a 1:1 backing with physical assets. Blockchain users looking for traditional solutions could rely on PAXG. 

How is PAX Gold a reliable addition among other emerging DeFi projects? The focus on PAX Gold, one of the most valuable physical assets in the world, is a distinctive highlight of the project. Gold has been one of the most trusted instruments for hedging against inflation. The high value of gold is not new, as it has been a valuable asset for thousands of years. 

PAX Gold is one of the top DeFi platforms which help users in purchasing gold as an effective financial decision in times of uncertainty. It is important to note that PAX Gold offers a completely decentralized approach to purchasing gold. Most important of all, it pays attention to the reduction of accessibility barriers, which helps beginners in using the platform without any issues. 

The pegging of the value of PAXG tokens against the price of gold also adds more credibility to the DeFi project. PAX Gold offers the advantages of decentralization, security against market volatility, and an effective instrument for long-term gains in DeFi.

Is There Any Other Player in the DeFi Sector?

The DeFi platform list you have reviewed just now includes the top five alternatives among projects slated to have a major influence on the DeFi industry in 2023. In addition, you should also take note of the following DeFi projects which could gain traction in 2023.

• Trader JOE

Trader JOE is a DeFi platform that utilizes the Avalanche network. The non-custodial DeFi solution offers access to a broad collection of financial services such as trading, lending, and borrowing.

The design of Trader JOE follows the best practices for ensuring speed, reliability, and security. Interestingly, Trader JOE is one of the most popular DeFi platforms to gain attention within a short period of time. The notable features of Trader JOE include low gas fees and a bigger liquidity pool. 

• Skilling

Skilling is a new addition among DeFi platforms that aim at ensuring mainstream accessibility of DeFi services. It is a suitable platform for beginners, which ensures the accessibility of commodity trading with 55 cryptocurrencies. In addition, users could access the Skilling app through their desktop or smartphone.

The Trading View feature in Skilling offers flexibility for plotting your trading ideas. Furthermore, Skilling also offers proprietary platforms such as cTrader and Skilling Trader for professional traders.

• Maiar DeFi

The list of DeFi platform examples with the potential to make it big in 2023 must also include Maiar DeFi. It is a trusted, non-custodial DeFi platform that uses the Elrond network.

Maiar DeFi provides access to multiple financial services, such as lending, trading, and borrowing.

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Bottom Line

Any discussion about top DeFi platforms would direct users toward the big players in the DeFi landscape. However, you can also find the best platforms in DeFi among emerging players as they bring new functionalities. For example, Metacade offers access to play-to-earn arcade games for earning crypto rewards. 

On the other hand, GMX serves as a trusted alternative for cryptocurrency trading after the failure of big centralized exchanges. The future of DeFi depends on new additions to the DeFi platform list with advanced functionalities. In addition, new DeFi solutions must also work on new ways to improve accessibility to DeFi services. 

Decentralized finance is an important component of web3, and aspiring web3 professionals must familiarize themselves with DeFi fundamentals and its underlying technology. Learn more about decentralized finance and its value for the future with comprehensive DeFi training courses now.

*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research! 

The post 5 Best Defi Platforms You Must Try appeared first on 101 Blockchains.