DAI

The DeFi industry is still in its infancy stage but has already registered some impressive growth over the years. The industry’s total value is currently locked at $14.92 billion and is expected to grow in the coming year.

There’s no doubt that DeFi brings about some unique solutions that are quite lucrative for investors of all kinds. If you’ve had your eye on the crypto industry for a while, there are chances that you’ve thought of putting your money in this exciting venture. But if you don’t know how to get started, you may feel stuck when choosing the best projects.

If you’re in this position, this article is just what you need. Buckle up, and let’s dive into the five best DeFi projects you should consider investing in the coming year.

Uniswap

Anyone who has been in the crypto industry for quite a while will agree that decentralized exchanges were primarily associated with thin order books and poor UX. These issues, coupled with exorbitant fees, centralized gateways, and too many transactions was the reason dex enthusiasts demanded a simple yet effective decentralized exchange.

Uniswap was launched in 2018 as an automated liquidity protocol for ETH and ERC-20 tokens. The platform has its own token, UNI, which is instrumental in governing protocol changes.

One of the things that make Uniswap unique is that it doesn’t use order books but instead has an automated market maker. Users only need to select the assets they want to trade, and the platform automatically completes the transaction.

Uniswap presents several advantages, which is why you should hop onto it already. It has no listing fees for new tokens, and users don’t have to complete the KYC checks. Besides, you get full custody of your funds and an excellent way to earn some extra tokens through the platform’s liquidity pools.

If you choose to invest in the platform, you could either be a casual user, an arbitrageur, or a liquidity provider, all of whom play essential roles in the ecosystem.

Yearn Finance

Yearn.Finance should be your go-to project if you’re looking to maximize the annual percentage yields on the cryptocurrencies you’ve deposited in DeFi. The unique project is an array of DeFi protocols built on Ethereum and designed for high-yield returns through liquidity pools and community governed lending protocols. Like Uniswap, Yearn Finance uses an automated market marker to allow users to convert tokens and earn from both lending and trading fees.

Yearn Finance is still relatively new in the industry, having been launched in February 2020. The platform had a rapid ascent in August, which saw its value rise to $650 million, accounting for a significant percentage of the entire industry’s value.

According to Jesse Walden, CEO of Variant Fund, “The unifying goal of all Yearn products is to create a simple, intuitive interface to all of DeFi.”

Yearn’s intuitive interface makes trading easier for all users. The platform is a portal for other DeFi products and has the YFI as its governance token. Yearn is considered entirely decentralized because the YFI tokens cannot be pre-mined, and the platform didn’t hold an ICO.

Although YFI was initially designed to be entirely community-governed, it can now be traded on other platforms such as Uniswap.

Curve Finance

You’ve probably heard of stablecoins, and if you know a thing or two about cryptocurrencies, they must have piqued your interest as an investor. Well, Curve Finance is an excellent DeFi platform if you’d like to trade-in stablecoins efficiently. It provides a solution to one of the most considerable problems in the DeFi sector; price slippage.

Like any other ideal marketplace, demand and supply forces determine the lending rates in DeFi. Now, suppose you want to trade between USDC and DAI. If the lending yield for USDC becomes higher than that of DAI, lenders will want to migrate to USDC. Curve Finance allows you to effectively do this and still earn better than you would with a regular DEX.

Switching between stablecoins effectively helps correct any anomalies in the interest rates that may result from mismatches in the demand and supply. Users can keep their profits once the interest rates are back to normal.

Curve Finance provides one of the best ways to earn as a liquidity provider with returns of over 300% per year for BUSD. This is made possible by providing liquidity to other DeFi protocols using the deposited funds. This move generates interest for the other protocols, and Yearn, in turn, assigns the interest to liquidity providers. Additionally, they receive some CRV tokens and a cut of the trading fees from the platform.

Speaking of stablecoins, DAI is one you should definitely watch out for in the coming year. The coin has its price pegged to the US dollar, which helps maintain its value. Whenever users on MakerDAO, the protocol behind DAI, take out a loan, the stablecoin is created. The decentralized nature of the protocol, together with the lack of volatility, ensures that DAI remains stable and transparent.

Initially, you’d only be able to use ETH as collateral for DAI. However, the stablecoin now supports different cryptocurrencies as collateral for a DAI loan. You can place your cryptos and get them back for the same price, despite changes in the coins’ values.

There are plenty of stablecoins available, so what makes DAI any different? Well, if you are really against censorship by governments and other regulatory bodies, you’re going to love using DAI. It is backed by smart contracts, which makes it resistant to censorship. It also provides privacy when transacting since users don’t need to complete KYC checks or create any accounts.

Kava

Kava developers used various technologies to create a system that would allow users of significant crypto assets to access collateralized loans and stablecoins. The network uses USDX as its stablecoin, and users get to collateralize their crypto assets in exchange for the stablecoin.

To help you gain a leveraged position in the market, you could take out several collateralized loans. For each of these loans, you’ll receive an equivalent amount of USDX to create synthetic leverage. You can then earn a passive income from the platform by staking and bonding your USDX coins.

Kava uses a dual token system that ensures usability and flexibility. The native token for the blockchain is Kava tokens, which double up as the governance and voting tokens. Kava tokens help to ensure the platform’s security through staking, which also earns users block rewards.

Kava has already made a name for itself in the business world by gaining some major entities’ attention. For example, Arrington Capital, Ripple, and Cosmos are behind this DeFi project, which provides some assurance in its profitability and sustainability.

Parting Shot

There’s no denying that the DeFi industry has taken giant leaps over recent months and will continue to do so in 2021. Like most investors, you’ll undoubtedly want to add long-term value projects to your portfolio, and DeFi is an excellent way to go about it.

Sure, it’s totally okay to be skeptical about new ventures such as this. However, the DeFi industry has proven to provide solutions to problems poised in centralized finance.

Just as you would with any other investment, it’s best to do your due diligence and learn as much as possible before placing your money in a DeFi project. These five projects should give you an excellent head start for your 2021 investments.

Unpredictability and wild volatility swings have always been the bane of cryptocurrency’s existence. As a solution, crypto experts invented the idea of stablecoins – which is a cryptocurrency pegged against “real-world” money to tame the fluctuations of crypto. But stable coins also turn out to have their own share of problems.

Maker is a token and a platform that seeks to improve the stablecoin model while mitigating the volatility risk inherent with cryptocurrency.

In this guide, we’ll discover the Maker system, how it works, the place of Maker in the entire crypto ecosystem, and how you purchase the Maker token.

What is Maker?

To begin to understand Maker, we need to get a good understanding of what is a stablecoin. Stablecoins are a new class of cryptocurrencies that attempt to mitigate the risk of normal cryptocurrencies. Cryptocurrency prices are prone to volatile fluctuations, which ultimately makes them unsuitable for day to day use or as collateral. For instance, who’d want to spend 100 crypto coins on a pair of jeans only to find out the next month they’re worth a fortune?

This is where stablecoins step in: to offer the best of cryptocurrencies – the privacy of money and instant processing, as well as the stability and predictability of fiat currencies.

The Maker System

The first thing to understand is that the Maker platform has a dual coin system: Makercoin (MKR) and Dai (DAI). Makercoin is a volatile token that governs the Maker platform. Dai is a stable coin designed for daily use, savings, and collaterals.

Dai is denominated in US dollars in a 1 DAI = 1 USD formula. Unlike the other stablecoins out there, DAI is not pegged to any fiat currency. Stablecoins that are pegged to fiat currency do not live up to the cryptocurrency vision of decentralization and censorship-resistance. By using external market economics, Makercoin is the volatile crypto coin that allows Dai to be a stablecoin.

As a decentralized stablecoin, Dai offers itself to four markets that could benefit from its use:

Gambling Markets – it doesn’t make sense to gamble with the wildly unpredictable cryptocurrencies. This would only expose the gambler to two risks: the risk that comes with the bet itself and the risk of the asset price. Using a stable cryptocurrency like Dai allows you to limit your risk solely to the usual probability of loss.

Financial Markets – Such financial markets like derivative smart contracts and options need collaterals of stable price values. The collateralized debt positions offered by the Maker platform also offers a permissionless, interest-free decentralized trading leverage, and decentralized tools.

International Trade – International transactions usually rack up high costs. Dai mitigates foreign exchange volatility while also removing the need for intermediaries in the transaction process.

Transparent accounting systems – Dai provides a completely transparent platform where all transactions can be verified – allowing organizations to improve efficiency and reduce the probability of fraud.

What Is the Use of the Maker Coin?

On the Maker system, the Maker token plays these roles:

Utility token. MKR is used to pay for the collateralized debt positions that generate Dai on the Maker ecosystem.

Governance token. Coin holders use the token to vote for operational changes in the Maker protocol through a continuous approval voting process. This means that the proposal that has the most votes from coin holders becomes the “top proposal” that can be activated to improve the protocol.

Recapitalization Resource. The Maker system automatically creates new MKR tokens in case of a shortfall on the collateralization system.

How Does The Maker Platform Work?

The Maker platform has a unique smart contract system called Collateralized Debt Position (CDPs). To generate Dai tokens, users must deposit collateral assets, which are then held by CDPs. Generating Dai also incurs the user some debt. The debt is what locks a user’s deposited collateral assets within the GDP until they can repay the debt in the same quantity of Dai, and withdraw its collateral.

Currently, “pooled ether” (PETH) is the only collateral accepted by the Maker system. To generate DAI, you must first convert Ether into the pooled ether.

A user’s interaction with CDP has the following stages:

Making the CDP. A user sends a transaction to Maker to initiate a CDP. They then send their PETH to collateralize the CDP.

Generating Dai. The user sends a transaction stating the amount of Dai they want from CDP. After generating Dai through this process, an equivalent amount of PETH is locked away in a CDP smart contract. They can only access this PETH when the Dai debt is paid off.

Debt Reconciliation. To get back their collateral, a user must pay off their outstanding debt in the CDP together with a “stability fee” that is essentially interest on the outstanding debt.

Withdrawing collateral. After the user’s debt and stability fee are paid off, the user can retrieve their collateral by sending a transaction to the platform

MKR Statistics

Makercoin impressively ranks at number 22 in terms of market capitalization. As of December 19, 2019, the crypto has a market cap of $476, 146, 583, a 24-hour trading volume of $4, 797, 594, and a circulating supply of 1 billion. Its all-time high was $1,773.92 on Jan 18, 2018, with its all-time low being $21.06 on Jan 30, 2017. Its current going price is $476.15.

How to Buy and Store MKR

Buying Maker comes with a two-step process. First of all, you need to buy some BTC or Ether from an exchange that accepts debit card deposits or bank wire. You then need to transfer the crypto to an exchange that will accept the BTC or Ether in exchange for MKR.

For example, you can buy BTC or Ether at Coinbase and exchange it for MKR in CoinbasePro, Gate.io, HitBTC, OKex, Kucoin.

Both coins of the Maker system are Ethereum tokens based on the ERC-20 protocol. As such, any ERC-20 compliant wallet is suitable for storing MKR. Hardware wallets such as the Ledger wallets, Trezor, Keep Key, Cool Wallet S, etc. are also recommended.

Conclusion

Maker addresses one of the biggest issues with cryptocurrency – its volatility. By stabilizing Dai’s value through external market systems, users get the best of crypto and fiat currency – privacy, instant payments, and the stability of value. Thus, you can invest in the crypto without worrying that its value will plummet overnight.

MakerDai also solves the issue of questionable centralization status and lack of transparency associated with other stable coins. As it is now, Maker has the opportunity to seize the stage and become the ideal stablecoin. It has the recognition, a working model, and an irresistible proposition for the cryptocurrency economy.