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Decentralized Finance, or DeFi in short, is revolutionizing the financial environment with decentralized alternatives to traditional monetary services. There are plenty of cryptos at the top of the list by the beginning of 2024.
Such DeFi applications give rise to innovative novel solutions for lending, borrowing, staking, and many more. Here, we gather and briefly explain what are the best cryptos for DeFi applications in 2024, their unique characteristics, advantages, and what they can do.
Ethereum is the base of the DeFi ecosystem mainly because of its powerful capabilities in smart contracts. Similarly, this happens to be a base that most of the DeFi applications largely rely on. Ethereum is home to an array of decentralized applications and protocols. Scarcity as well as energy efficiency greatly improved with the adoption of Ethereum 2.0 and proof-of-stake.
Smart Contracts: Ethereum smart contracts can be used in creating complex financial instruments with no need for middlemen.
DeFi Ecosystem: Host big DeFi applications such as Uniswap, Aave, and Compound.
Scalability: Ethereum 2.0 raises the speed and cuts fee costs on transactions, making it a more viable option for DeFi applications.
Lido Staked Ether, or stETH, is the liquid staking solution for the Ethereum protocol. The solution merely makes it easier for users to stake their ETH without locking them up. That flexibility aspect makes stETH an extremely popular choice among DeFi fans who would love to enjoy rewards from staking while still having liquidity.
Liquid Staking Users can lock their ETH and receive stETH which can then be used in several DeFi protocols.
• Flexibility: No lock-in period. It means that users are free to move their assets without any lock-in period.
• Integration: The platform has very wide integration with the DeFi platforms, thus amplifying the utility and accessibility of the same.
Aave is one of the biggest DeFi protocols for loaning and borrowing with a service that involves peer-to-peer. Lending allows users to lend assets and earn interest, or borrow assets by providing collateral. What puts Aave in a different league from most lending platforms is its innovative features, such as flash loans and credit delegation.
• Lending and Borrowing: Stake and earn interest or borrow assets with minimal pain
• Flash Loans: Non-recourse loans to be repaid within the same transaction cycle, or not at all (bring arbitrage opportunities)
• Credit Delegation: enables users to delegate credit lines to other users thereby increasing flexibility and utility
Uniswap is a DEX-an exchange that is known to perform direct swapping without the involvement of any middleman. It follows an automated market maker model, and one can trade directly out of the wallets using its peer-to-peer direct trading. That puts Uniswap at the foundation core of the DeFi ecosystem with simplicity and efficiency.
De-Centralized Trading: the peers can trade directly with each other instead of channeling the activity into a centralized platform.
Liquidity Pool: those willing to "lock" their liquidity into a pool are rewarded in the form of "fees."
User-Friendly: easy to use, interoperable with Ethereum wallets
Chainlink is an oracle network that allows the retrieval of real-world data into smart contracts on the blockchain. It plays a great role for most DeFi protocols as it makes possible interactions between an application running on blockchains and off-blockchain data sources.
Oracles: It securely connects smart contracts to off-chain data, thus allowing much more complex and sophisticated DeFi applications.
Data Integrity: It guarantees that only legitimate data inputs into smart contracts.
Usage Example Universally Used: It is used and connected to hundreds of DeFi applications making it very valuable and also important.
Maker is a stablecoin protocol pegged to the US dollar through DAI. Maker is a utility tool that enables users to create DAI on top of any collateralized asset, whether Ethereum or others. That is, it is an important decentralized stablecoin that stabilizes many applications in DeFi during a volatile market.
Stablecoin: DAI price is stable and very apt for transactions and savings.
Collateralized Debt Positions (CDPs): In this platform, the user can lock up assets to generate DAI and, therefore, bring about liquidity and stability.
Governance: Maker protocol is governed through the participation of MKR token holders who influence the development of policies therein.
Synthetix is one of the decentralized protocols, allowing users to create synthetic assets and a form of representation of real-world assets, such as commodities, fiat currencies, and stocks. Therefore, gains in broad exposure to diversity can be achieved without actually owning the asset.
Synthetic Assets: This is possible through accessing a portfolio of any large asset for advanced diversification.
Staking: It enables users to stake SNX for the creation of synthetic assets and the collection of rewards.
Innovation: Highly developing the products of synthetic assets and its protocols.
The DeFi ecosystem keeps emerging every day with the launching of a single project per day. For now, as of 2024, some of the leading cryptocurrencies that are at the frontline of setting the pace for DeFi are Ethereum, Lido Staked Ether, Aave, Uniswap, Chainlink, Maker, and Synthetix. All these, in one way or the other, have unique features and benefits for the growth and diversification of the DeFi ecosystem. In all such ways, these cryptocurrencies will be crucial for giving shape to the future of decentralized finance as the industry grows further.
