Chapter 1: Understanding DeFi

In the evolving landscape of cryptocurrency, we are witnessing a significant shift beyond traditional currencies. While Bitcoin marked the genesis of this revolution and Ethereum introduced decentralized applications, we are now entering the era of DeFi, or decentralized finance. This movement signifies the rise of independent, decentralized businesses that will play a crucial role in shaping our economic future.

In this article, we will explore five key DeFi projects that every investor should monitor closely:

1. Chainlink

   Chainlink operates as a blockchain network that safeguards against unauthorized data access while enabling users to engage with intricate smart contracts. The capitalization of LINK tokens surged by 600% last year, establishing them as one of the top-performing assets. Chainlink's platform ensures data protection not only within the blockchain but also externally.

Investors should pay attention to Chainlink's unique blockchain network, which features specialized nodes known as oracles. This DeFi network of oracles aggregates input data from various sources, enabling it to seamlessly connect with smart contracts. This process significantly enhances the accuracy of information delivery, which is challenging to verify through centralized means.

2. Polkadot

   Polkadot, conceptualized in a white paper authored by Gavin Wood in 2016, is a multichain framework designed to foster a fully decentralized ecosystem (WEB 3.0) governed by its users. It facilitates the creation of both private and public networks, as well as permissionless networks and oracles.

This advanced iteration of the internet allows autonomous blockchains to share data and conduct transactions via the Polkadot chain. It simplifies the development and interlinking of decentralized applications, institutions, and organizations, aiming to create a trustless environment.

3. Uniswap

   Currently, Uniswap stands out as a highly popular decentralized cryptocurrency exchange. It leads in terms of gas consumption and transaction fees within the Ethereum network. The activities on Uniswap significantly contributed to the surge in transaction fees on Ethereum in 2020.

Uniswap has solidified its position as the foremost DeFi token exchange, with daily trading volumes reaching as high as $300 million. The rapid expansion of notable DeFi projects this summer, such as YFI and LINK, can be attributed to heightened trading activity on Uniswap.

4. DeFi Chain

   The DFI token serves as the primary currency within the DeFi blockchain ecosystem. This non-Turing complete blockchain, built on Bitcoin, is specifically designed for decentralized finance applications. Over its lifetime, the Singapore-based DeFi Foundation plans to issue 1.2 billion DFI tokens.

Currently, one DeFiChain (DFI) is valued at $3.73 on leading cryptocurrency exchanges, with a market cap of $1.51 billion. Given the prevalence of scams and hacks in the Ethereum landscape, the DeFi framework mitigates risks by being non-Turing complete and narrowly focused on its intended functionality, thus providing enhanced security and efficiency.

5. Compound Finance

   Compound Finance allows users to lend and borrow cryptocurrency assets, akin to a traditional banking system. Lenders provide their assets and earn interest, while borrowers pay this interest, creating a revenue stream for Compound.

As many individuals seek quick wealth, Compound has enabled users to maximize their earnings by acquiring as many COMP tokens as possible. Currently, COMP is priced at $573.38, with a total market capitalization of $2.91 billion.