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Almost nothing has piqued the interest of the crypto community more this year than the introduction of DeFi (Decentralized Finance) applications.
The notion entails typical financial transactions taking place on the blockchain. Smart contracts are generally used to allow these transactions. In addition, unlike traditional payments or transfers, they do not require the use of financial middlemen. DeFi transactions often vary from regular loan to derivatives production.
The boom in the DeFi space is just getting started.
According to DeFi Pulse, the Total Value Locked (TVL) - a measure of the total value of cryptocurrencies committed to a smart DeFi contract increased from $2 billion to $15 billion in 2020. And the year 2021 has seen extraordinary growth. The TVL has more than quadrupled to just about $100 billion since the beginning of the year.
Yield farming is one of the most popular contemporary DeFi applications. Yield farming is the practice of lending cryptocurrency assets to other platforms in exchange for interest or fresh cryptocurrencies. On the surface, yield farming looks a lot like digital banking. Users deposit their crypto assets in a fund pool and earn interest on those assets. Many times, the depositor is staking a new cryptocurrency platform.
In exchange for the liquidity he or she offers, he or she will obtain a new crypto asset. Because of the greater returns they can provide depositors in our low-interest-rate climate, yield-farming platforms have gotten a lot of attention. Compound is most likely the most significant yield farming DeFi platform.
It enables users to deposit cryptocurrencies into a pool in exchange for a redeemable token representing a stake in that pool. Compound essentially serves as a clearinghouse for crypto-based financing. The platform's entire supply is presently worth more than $18 billion. In addition, the entire amount loaned is estimated to be over $7 billion. Furthermore, sites such as Crypto.com are fusing the worlds of traditional banking and DeFi. The site enables users to store cryptocurrencies in a digital wallet, swap cryptocurrency, yield farm, and pay with credit cards such as Visa using the cryptocurrencies in their wallet.
DEXs enable cryptocurrency owners to deal directly without the use of an intermediary. They also provide consumers with total ownership and management over their cryptocurrency holdings. The monthly trading volume on DEXs is steadily increasing. The monthly trade volume in January 2021 was $56 billion, up more than 1,000 percent from the peak of $26 billion in September of 2020.
Uniswap is an Ethereum decentralized trade protocol. It gives liquidity to the enormous number of DeFi apps built on the ethereal network. Uniswap is the indisputable market leader, accounting for somewhat more than half of overall trade volume across all DEX platforms.
SushiSwap, a branch of the Uniswap DEX, is encroaching on the bigger exchange's domain. In January 2021, the SushiSwap exchange accounted for 23% of total monthly trading volume. SushiSwap's quick rise, however, is more astonishing than its present position. It held only 1.98 percent of the entire DEX volume market share last year.
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