One of the main aspects of DeFi or any financial system is lending and borrowing. Much like what we see in the current centralized financial system, DeFi is the same but instead of it being controlled and handled by a central entity, DeFi focuses solely on decentralization and giving control to its users. In simple terms, the way lending and borrowing works in DeFi is basically allowing its users to become lenders and borrowers in a permissionless and decentralized manner and still having full control of their assets. The lending and borrowing is handled by smart contracts, a big part of blockchain platforms like Ethereum which is the biggest player in the DeFi space.
Uniswap is without a doubt one of the top players in the decentralized finance space. I’m pretty sure anyone who is in the crypto space must have come across or heard about Uniswap. Uniswap doesn’t need any introduction as far as DeFi is concerned as it is one of the heavyweights in the DeFi space. It took over the scene since it was launched and since then, it has become one of the most used DeFi protocols at the moment. Uniswap is basically a protocol for exchange of tokens in a decentralized way. In simple terms, it is a DeFi or decentralized crypto exchange on the Ethereum blockchain. One of the amazing things about Uniswap is that it is an open source protocol, which means that anyone anywhere can interact with the protocol. The Uniswap protocol is fully decentralized, deploys smart contracts and is built on the concept of liquidity pools and automated market makers. Uniswap has its own token known as UNI token.
Maker which is also known as MakerDao is also one of the top decentralized platforms currently. Maker or Maker is a DeFi platform that is built on Ethereum. It is basically a lending platform that is permissionless. Maker allows its token holders to be part of the governing of the maker ecosystem. What this means that owning maker token gives the holders stakeholder position in the maker ecosystem. Maker’s value is tied to DAI which is what maker is responsible for… DAI is a stable coin on the ethereum blockchain. The main purpose of the token is basically to stabilize DAI with the use of Collateralized Debt Position or CDP for short.
Synthetix is also a big part of the DeFi ecosystem, synthetix is basically a protocol that enables the issuance of synthetic assets on the Ethereum blockchain. Whenever the term derivatives is mentioned in DeFi, synthetix is one of the top names that come to mind. It is a derivatives liquidity protocol that ensures derivatives trading in Decentralized Finance. Derivatives are one of the major elements of DeFi or any financial system in general. Derivatives basically means value that is derived from usually the price of an underlying asset in the case of DeFi, that asset is cryto. Synthetix allows for the creation of synthetix assets that track the price of their underlying asset and supports cryto assets that can be traded on other trading platforms. The model used by Synthetix is based on what is called a debt pool. In order to issue a particular Synthetix asset, the user would have to provide SNX token as the collateral.
Compound is another top decentralized finance project that provides solutions. When you talk about lending and borrowing in DeFi, Compound is definitely one of the top protocols out there, it’s making a name for itself and definitely one of the names that come to mind as far as lending and borrowing in DeFi is concerned. Compound is a DeFi platform, it is basically a decentralized protocol based on blockchain, allowing its users to lend and borrow crypto. Compound has its governance token known as COMP… users who own and hold the COMP token have a say in the governance. Compound work by creating money markets for certain crypto like DAI (stable coin), ETH etc. Users can become lenders by supplying their token to a particular money market and start receiving interest based on the APY supplied.