Decentralized Finance (DeFi) emerged as a new trend in the cryptocurrency market in 2020. The concept of DeFi refers to the use of blockchain technology to create a financial system that is independent of centralized authorities. In this system, people can transact directly with each other without the need for intermediaries. DeFi has witnessed rapid growth in recent years, with the total value locked in DeFi protocols reaching over $60 billion in May 2021. As a result, many investors are keen to know which DeFi coins are worth buying. In this article, we will explore the top DeFi coins to buy in 2021.
Decentralized finance, or DeFi, has gained significant traction in the cryptocurrency industry in recent times. DeFi coins are digital tokens that serve as the backbone of various decentralized finance applications built on blockchain networks. Given the rise in demand for DeFi solutions, many investors are keen on identifying which DeFi coins to buy to maximize their returns. In this discussion, we’ll explore the DeFi market and offer insights on some of the best DeFi coins to buy in 2021.
Understanding DeFi Coins
DeFi coins refer to cryptocurrencies that are used in the DeFi ecosystem. These coins include stablecoins, governance tokens, and utility tokens. Stablecoins are cryptocurrencies that are pegged to real-world assets such as the US dollar or gold. Governance tokens allow holders to participate in the decision-making process of a DeFi protocol. Utility tokens, on the other hand, are used to pay for transaction fees and access services within a DeFi ecosystem.
Stablecoins
Stablecoins are an essential part of the DeFi ecosystem. They provide a stable store of value and facilitate transactions within the DeFi ecosystem. The most popular stablecoins in the DeFi ecosystem are USDT, USDC, and DAI. USDT and USDC are both pegged to the US dollar, while DAI is a decentralized stablecoin that is pegged to a basket of assets.
Governance Tokens
Governance tokens allow holders to participate in the decision-making process of a DeFi protocol. Holders can vote on proposals such as changes to the protocol’s code, new product features, and changes to the protocol’s governance structure. Some of the popular governance tokens in the DeFi ecosystem include UNI, COMP, and AAVE. UNI is the governance token of Uniswap, a decentralized exchange. COMP is the governance token of Compound, a decentralized lending platform. AAVE is the governance token of Aave, a decentralized lending and borrowing platform.
Utility Tokens
Utility tokens are used to pay for transaction fees and access services within a DeFi ecosystem. Some of the popular utility tokens in the DeFi ecosystem include LINK, MKR, and SNX. LINK is the utility token of Chainlink, a decentralized oracle network. MKR is the utility token of MakerDAO, a decentralized lending platform. SNX is the utility token of Synthetix, a decentralized synthetic asset platform.
Top DeFi Coins to Buy in 2021
The DeFi ecosystem is constantly evolving, and new projects are emerging every day. However, some DeFi coins have stood out in terms of adoption, innovation, and growth potential. In this section, we will explore the top DeFi coins to buy in 2021.
Uniswap (UNI)
Uniswap is a decentralized exchange that allows users to swap ERC-20 tokens without the need for intermediaries. UNI is the governance token of Uniswap, and holders can vote on proposals to improve the platform. Uniswap has been one of the most successful DeFi projects, with over $6 billion in daily trading volume. The platform has also launched Uniswap V3, which allows for concentrated liquidity and better capital efficiency.
Aave (AAVE)
Aave is a decentralized lending and borrowing platform that allows users to earn interest on their crypto holdings. AAVE is the governance token of Aave, and holders can vote on proposals to improve the platform. Aave has been one of the most successful DeFi lending projects, with over $15 billion in total value locked. The platform has also launched Aave V2, which includes new features such as flash loans and credit delegation.
Chainlink (LINK)
Chainlink is a decentralized oracle network that provides off-chain data to smart contracts. LINK is the utility token of Chainlink, and holders can use it to pay for oracle services. Chainlink has been one of the most successful DeFi infrastructure projects, with over 600 integrations and partnerships. The platform has also launched Chainlink VRF, which allows for provably fair random number generation.
MakerDAO (MKR)
MakerDAO is a decentralized lending platform that allows users to borrow DAI, a stablecoin pegged to the US dollar. MKR is the governance token of MakerDAO, and holders can vote on proposals to improve the platform. MakerDAO has been one of the most successful DeFi lending projects, with over $8 billion in total value locked. The platform has also launched the Multi-Collateral Dai (MCD) system, which allows for the collateralization of various assets.
Compound (COMP)
Compound is a decentralized lending platform that allows users to earn interest on their crypto holdings. COMP is the governance token of Compound, and holders can vote on proposals to improve the platform. Compound has been one of the most successful DeFi lending projects, with over $10 billion in total value locked. The platform has also launched Compound Gateway, which allows for easy onboarding of new users.
FAQs for What DeFi Coins to Buy
What is DeFi?
DeFi stands for decentralized finance, which refers to a financial system that operates on a decentralized blockchain network, without any intermediaries like banks or other financial institutions. DeFi projects offer a range of financial services, including lending, borrowing, trading, and more.
How do I choose what DeFi coins to buy?
Choosing the right DeFi coins can be a challenging task since there are numerous options available in the market. It is advisable to research carefully before investing in any DeFi project. Look for projects that have a solid team with a track record of delivering successful projects. Check the project’s whitepaper to understand its goals, objectives, and overall vision. Analyze the project’s token economics, such as token supply and demand, circulating supply, and market capitalization.
What are the top DeFi coins to buy?
Currently, there is no definitive answer to which DeFi coins are the best to invest in; however, there are some popular picks in the DeFi space. Examples include Uniswap (UNI), Aave (AAVE), Compound (COMP), SushiSwap (SUSHI), and Chainlink (LINK). It’s important to note that these coins’ value may fluctuate due to market volatility.
Is it safe to invest in DeFi coins?
Like any investment, there are risks associated with investing in DeFi assets. The decentralized nature of DeFi means that there are no intermediaries such as banks or regulators that oversee transactions or protect investors. It is crucial to do your research and understand the risks before investing your money.
Where can I buy DeFi coins?
DeFi coins can be bought and sold through various cryptocurrency exchanges, such as Binance, Coinbase, and Kraken. Before making any transaction, research the exchange’s credibility and trustworthiness to avoid scams or hacks. Be sure to choose a secure, trustworthy platform to protect your investment.