Disclosure
Contents on this site will contain reference to products and services from our partners. We may receive compensation when you click on some links - at no extra cost to you.
What is DeFI Crypto

This guide delves deep into the world of DeFi crypto. We will help you understand what a DeFi coin is and how it works. We will then introduce you to the best DeFi platforms, top DeFi coins and discuss the benefits of investing in DeFi.

By the end of this post, you will also have learned the difference between decentralized and centralized finance and whether DeFi crypto is good investment.

DeFi Crypto Explained

DeFi (Decentralized Finance) is an umbrella term used to refer to different peer-to-peer financial services offered on public blockchains. It is a relatively new concept of investing and a revolutionary way of interacting with finances. And it seeks to replace conventional and other financial institutions with decentralized/trustless smart contracts.

DeFi Crypto Explained

Source: dzone.com 

There are two primary ways of relating to DeFi platforms. First is DeFi investing, which can then take the form of DeFi staking, yield farming, and crypto interest accounts. These offer you rewards – mostly in the form of interest – when you invest your crypto on their platforms. And the upsides of using DeFi crypto and not banks is that the former pays a relatively higher interest.

There also are DeFi platforms that focus on crypto lending and borrowing. These let you access loan services without having to go through a centralized bank. Some of the perks of crypto borrowing are that the loan application process is less bureaucratic, interest rates are friendlier, and it is also less intrusive as the platform doesn’t ask for any personal information.

Cryptoassets are a highly volatile unregulated investment product.

How Does DeFi Work?

We started by saying that DeFi is a term used to refer to an umbrella of financial services offered on the decentralized public blockchain. Therefore, to understand how DeFi works, we need to take a look at all the popular DeFi services.

How DeFi Crypto Work

Source: mlsdev.com 

Here are some of the most popular DeFi services that you can leverage to generate attractive yields on your money.

DeFi Crypto Staking

Staking involves earning rewards when you pledge to lock up your crypto for a specific period of time. There are two primary ways of earning through staking. First, you can pledge the crypto in its own proof-of-stake blockchain networks like Ethereum, Cardano, or Avalanche. This appeals to individuals who are passionate about particular blockchain networks.

Alternatively, you may choose to stake your crypto through third-party platforms. There, for instance, are countless third-party staking platforms – especially decentralized exchanges (DEXs) that have a staking feature. These will also pay higher interest rates than proof of stake blockchains.

Here is an example, when you stake Solana on the network, you earn between 6.99% and 7.61% if delegating or running a validator node – respectively. If you, on the other hand, choose to stake SOL through a third-party platform like the DeFi Swap, the rewards may be as high as 14% APY.

The other upside to staking via third-party platforms and DEXs is that they also let you stake some of the hottest cryptos, like Bitcoin, Shiba Inu, and Dogecoin, even though they aren’t backed by a proof-of-stake blockchain network.

DeFi Yield Farming

Yield Farming is, in many ways, similar to staking since they both involve pledging your crypto to a DeFi platform and earning attractive rewards in return. Yield farming, however, only takes place on decentralized exchanges and involves contributing liquidity to buyers and sellers on that DEX. The liquidity providers then share the transaction fees earned by each liquidity pool based on their crypto contribution.

Here is how it works:

Let’s assume that a DEX like Uniswap or Pancakeswap offers the trading pair ETH/TUSD. This allows traders on the DEX to swap ETH for TUSD and vice versa. Yield farming involves supplying the DEX with liquidity in the form of ETH and TUSD tokens that traders will use to facilitate their transactions. The DEX then charges a fee for the swaps, which are shared among the liquidity providers.

DeFi Crypto Interest Accounts

Crypto interest accounts function like the conventional interest accounts that they seek to replace. They pay you interest at an agreed rate when you deposit your crypto here.

DeFi Crypto Interest Account

Their popularity has been on the uptrend as they offer higher interest rates than interest accounts at your local bank. In the US, for example, interest rates have been paying a measly 0.10% APY interest on savings. And if you agree to lock up these funds for a pre-determined period – mostly a few months or years – in a CD account, this interest may rise to between 2-3% annually.

DeFi interest accounts like Aqru, on the other hand, offer much higher returns on your deposit. Therefore, in place of depositing your cash in the standard bank account, consider depositing this amount in an Aqru account and converting it to a stablecoin like USD Coin (USDC), Tether (USDT), and Maker DAI. This will earn you more than 10% in annual interest rates. You may also consider converting the cash to popular cryptos like Bitcoin, Ethereum and Cardano.

DeFi Loan Facilities

We have mentioned that DeFi loan apps work in a similar fashion to traditional banks. They give their platform users access to an instant line of credit without requesting their personal information or credit checks. You only need to provide crypto collateral. The Loan-to-Value (LTV) ratio will then vary from one crypto lender to another.

Assuming you have deposited crypto worth $5000 in a DeFi crypto loan platform that has a loan-to-value ratio of 50%, you will receive instant access to a credit line of $2500. The majority of these lenders will let you withdraw this amount in the form of your favourite crypto or fiat cash.

These come in handy when you need instant access to cash but do not wish to sell your digital assets. You also get to keep the capital gains of your digital assets should they appreciate in value while being collateralized.

Decentralized Finance (DeFi) vs Centralized Finance (CeFi): Key Similarities and Differences

There are a few similarities between centralized finance and decentralized finance service providers. For starters, they both offer almost similar financial services – from loans to interest accounts, albeit with different structures and systems. Secondly, they both manage currency and transaction flows on their platforms.

Defi Crypto

Below, we look at the top five differences between DeFis and CeFis:

  • Personal information: When opening a savings account or applying for a loan, most traditional centralized financial service providers request a lot of personal – often intrusive – information. This is unlike DeFis, that do not ask for any personal information from their platform users.
  • Security: DeFi, unlike CeFi, does not act as a custodian of your digital assets. In most instances, your payments and transactions are guided by immutable smart contracts.
  • Interest rates: We have already illustrated how DeFi platforms pay higher interest on your investment than most traditional finance services providers.
  • Disqualification: CeFis can deny you loans based on your credit score, income, and other factors out of your control. Some will even close your accounts if they disagree with your political/social ideologies. This would never happen within the DeFi circles, as your loan qualification is solely based on your ability to provide collateral.
  • Regulation: CeFis are highly centralized, which allows for regulation. DeFis, on the other hand, are self-regulated through Decentralized Autonomous Organizations and immutable smart contracts.

What is the Important of DeFi Crypto?

DeFi crypto has revolutionized how we view and interact with money. For the first time in ages, you do not need a centralized financial institution or have to go through a middleman to access basic financial services like cash transfers or savings. You also do not need a bank or hedge fund to get loans or earn interest on your investment.

But DeFi has done more than just remove the middleman. It has also done away with all the bureaucracies around these financial services. Below, we look at some of the benefits of using DeFi and not traditional banks.

Benefits of DeFi

Here are some of the main benefits of using DeFi crypto today:

Higher returns on investments

Most DeFi platforms present their users with highly attractive yields on your digital assets – often ranging between two and triple-digit APYs. This is way higher than what is offered by most CeFi institutions. This allows you to grow your capital at a faster rate.

Control over your assets

DeFi gives you uncontrolled access and near-absolute access to your digital assets. You have absolute control over all the best crypto wallets holding your digital assets, which makes your capital censorship-resistance.

Anonymous transactions

DeFi crypto platforms, unlike CeFis, do not ask for any personal information from their users. This implies that you can interact with different crypto financial services, including accessing loan services anonymously. You do not need a credit report check. Neither will the DeFi platform ask for intrusive personal information.

Permissionless

CeFi transactions have to be authorized by a middleman. It especially gets really bureaucratic if the transaction involves a large amount of money. DeFi transactions, on the other hand, are permissionless and near-instantaneous, regardless of the amounts involved.

Helping the unbanked

DeFi platforms are also more accessible compared to CeFi service providers. You only need an internet-enabled device and internet to access the DeFi world, while most CeFis still insist on maintaining main street physical locations.

Is DeFi Crypto a Good Investment?

Yes, DeFi crypto is a good investment, thanks to a number of factors. For starters, DeFi investors earn higher returns, as we have illustrated hereinabove. But even more importantly, DeFi investors do not just benefit from higher interest rates. They also grow their capital when the value of the digital assets they have invested in appreciates.

Secondly, DeFi investing is good because it presents you with a broad range of ways through which you may leverage when seeking for ways to make money with crypto. These include staking, yield farming, crypto interest accounts, managed smart portfolios, and more.

Cryptoassets are a highly volatile unregulated investment product.

Best DeFi Crypto Platforms in 2024

There currently are hundreds of crypto investing platforms that fall within the DeFi spectrum. These present crypto enthusiasts with a broad range of ways that they can leverage if they wish to put their digital assets into productive use.

Below, we provide you with an overview of what we consider the three best DeFi crypto platforms. These let you make money through staking, yield farming, interest accounts, or crypto lending.

1. DeFi Swap – Overall Best DeFi Platform

Launched in 2015, the DeFi Swap exchange is one of the oldest of the most successful DeFi exchanges. Over time, it has morphed into one of the most popular and most liquid DeFi-focused exchanges. This and a few other factors help DeFi Swap rank highly on our list of top DeFi platforms today.

DeFi Swap

These include the fact that DeFi Swap is 100% decentralized. This implies all transactions carried out here are guided by immutable smart contracts. We also liked its flexibility and its ability to consistently pay out relatively high yields. You, for example, get to choose the lock-up period for your staked digital assets, and this starts from 30 days to 12 months. This lets you enjoy double- and often triple-digit yields on these assets, with the APY of the DeFi Coin hovering around 75%.

We also liked the DeFi Swap exchange because it presents you with multiple ways of earning passively. In addition to staking, you can also make money when you contribute liquidity to different pools. And there are multiple pools featuring both the more popular coins as well as the next cryptos to explode.

DeFi Swap exchange also makes it because of its user-friendliness. To start swapping crypto, staking, or contributing to liquidity pools on the platform, for instance, you only need to connect the DeFi Swap with your crypto wallet. No personal information is required.

Pros:
  • Easy to use
  • No middlemen – DeFi Swap is 100% decentralized
  • The DeFi platform will be launching an NFT marketplace and mobile app soon
  • Earn attractive rewards and interest on pooled and staked digital assets
  • Swap all the popular tokens instantly at competitive prices
Cons:
  • Limited earning avenues as it is yet to start supporting Crypto lending and interest accounts
  • Doesn’t support cross-chain swaps
  • No Bitcoin swaps

2. Crypto.com – Beginner-Friendly DeFi Platform with Attractive Interest Rates

Crypto.com is one of the fastest-growing centralized crypto exchanges in the world today. It features on our list of the best DeFi platforms and crypto apps around today because it integrates a DeFi platform. Here, you get to interact with several DeFi services, especially staking and crypto lending and earn decent yields on your digital assets.

Crypto.com DeFi Platform

When staking on Crypto.com, for instance, Stablecoins like Tether will earn up to as much as 14.5% APY while popular coins will net you upwards of 10% APY. It also stands out as one of the few top DeFi Platforms where you can stake Bitcoins.

In addition to staking digital assets, Crypto.com also offers crypto lending services. Here, Loan-to-Value (LTV) ratio is capped at 50%, which implies that for every $100 worth of crypto that you lock on the platform, you can borrow $50. The payment period is flexible, and interest rates on loans are competitive – starting from 6.5%.

We also liked Crypto.com’s user-friendliness, which has made it a top DeFi platform for beginner crypto investors. This starts with a quick and straightforward account opening process. It then integrates a wide range of educational content – including such guides as how to buy cryptos today.

Crypto.com also supports both fiat and crypto deposits, implying that you can buy the best future cryptos on the platform with credit cards, debit cards, and bank transfers on the platform before moving them to the staking platform.

You would also appreciate that Crypto.com presents all its platform users with a free DeFi crypto wallet. This is available as a mobile app and integrates both the staking and crypto lending features. And if you wish to spend the crypto held in your Crypto.com account or wallet, simply order the Crypto.com Card (created in partnership with Visa) and use it to pay for goods and services – both online and offline.

Pros:
  • Earn a decent interest rate when you stake crypto – including Bitcoins
  • Access and manage your crypto on the move with the DeFi wallet app
  • com is highly beginner friendly
  • Solid reputation for reliability, fast transaction processing, and security
  • Offers both DeFi and centralized exchange services
Cons:
  • Relatively low APYs on staking than competitors
  • com taxes DeFi rewards
  • DeFi wallet only features a limited selection of education and trading/analysis resources

3. Aqru – Earn Competitive Rates on All Popular Cryptos and Stablecoins

Aqru is one of the best crypto trading platforms, popular for its flexibility and user-friendliness. For starters, it is available both as a website and mobile app. Not forgetting that it maintains a quick and straightforward account opening process. Additionally, it doesn’t maintain fixed lock-up periods. On the contrary, you can withdraw your funds with just a 24-hour notice, no questions asked and no fines.

Agru DeFi Platform

Aqru also ranks highly among the best DeFi platforms because it provides its platform users with decent yields on staked crypto. You also get to choose if you want to be paid a fixed or flexible interest rate on locked crypto. Fixed rates can be as high as 10% APY for popular stablecoins. All other new cryptos, as well as established coins supported on the platform, earn yields high as 7% annually.

We also liked Aqru because of its affordability and transparent pricing model. When using their exchange to swap cryptos, for instance, Aqru will only charge a fixed commission of 0.35% of the transaction amount. You also get to the transaction fee before hitting the swap button.

In addition to all these, you would also like to use Aqru because it lets you buy cryptocurrencies with bank deposits or cards. And it doesn’t charge a deposit fee for either of fiat or crypto deposits. Fiat withdrawals are also free.

Pros:
  • No fixed lock-up periods or deposit limits
  • You only need to deposit $100 to get started
  • Beginner-friendly DeFi platform with a user-friendly interface
  • Aqru lets you buy cryptos with fiat deposits
Cons:
  • Crypto withdrawals aren’t free
  • A limited number of supported cryptos

Best DeFi Coins in 2024

How much you make when DeFi investing will be determined by more than just your choice of the best DeFi platform. It will also be determined by your choice of DeFi coin.

Our analysts vetted hundreds of best DeFi coins and settled on what we believe to be the five best altcoins to add to your portfolio. These have not only performed exemplarily well in the past but also have a hugely promising future.

Here is a quick overview of these assets:

1. Uniswap (UNI) – Overall Best DeFi Coin to Invest in Right Now

Uniswap token is one of the most popular cryptocurrencies and the native token for the Uniswap DEX. Like DeFi Coin, it makes it to this list because it presents its investors with multiple ways of making money. For starters, you stand to grow your capital by simply buying and holding UNI tokens when it appreciates in value.

Uniswap Altcoin

Secondly, you can make money with Uniswap when you contribute liquidity to the many UNI-paired pools hosted on the DEX. In this case, you get to share the income from these pools earned from trader fees.

Alternatively, there are countless DEXs and DeFi platforms where you can stake UNI tokens and earn highly competitive interest rates. At the time of writing, for example, ReHold is paying UNI holders interest of up to 94% APY (payable daily) when they stake UNI tokens on the platform.

Cryptoassets are a highly volatile unregulated investment product.

2. USDC (USDC) – Popular DeFi Coin With High Yields

USDC is one of the most popular, used, and valuable stablecoins. Three primary factors informed our decision to feature it among the best DeFi coins to invest in right now. These are its acceptability, ability to earn competitive yield, and the fact that it has multiple use cases.

USDC Crypto

Today, Tether has been embraced by arguably all the most popular DeFi platforms. These also pay relatively high interest rates and rewards for staked stablecoins. Staked USDC on Crypto.com, for example, attracts one of the highest interest rates – at 6.5% APY while the likes of Aqru pay upwards of 10% interest for USDCs staked on their platform.

We also like USDC because of its fluidity. This implies you can make money from USDC by more than just staking. Some platforms will let you contribute liquidity to USDC-paired pools, while others will let you deposit USDC onto crypto interest accounts.

Above all, our analysts settled on USDC as the best DeFi crypto and not other stablecoins because of its solid reputation for safety. Unlike most other stablecoins, USDC has been subjected to a thorough proof of reserve audit, which showed that the stablecoin is backed one-for-one by the US Dollar.

Cryptoassets are a highly volatile unregulated investment product.

4. Aave (AAVE) – Popular DeFi Coin Expected to Rebound Soon

Aave coin is the native token for one of the largest DeFi platforms – with more than $7.4 Billion of total value locked. It is also one of the most valuable DeFi coins by market cap, having peaked above $7.3 Billion during the most recent bull market. Like both DeFi Coin and Uniswap, Aave features on our list of the best cryptos to buy right now because it, too, presents you with multiple income-generating avenues.

AAVE Crypto

For starters, you can grow your capital by simply buying and holding the Aave crypto asset. This claim is premised on the fact that Aave has been trading more than 90% below its all-time high and is expected to rebound and set out for a new record price during the highly anticipated bull market.

Secondly, you can earn decent revenues when staking the DeFi crypto on the Aave platform with the current interest rates hovering around 6.0%. You may also stake on such third-party DeFi platforms as ReHold that promise interest rates of up to 99% APY.

Other ways of earning decent crypto rewards when investing in Aave include supplying liquidity to the Aave-paired pools on the Aave protocol. And since it also provides crypto lending services, you also deposit your Aave into the protocol and borrow up to 50% of this amount.

Cryptoassets are a highly volatile unregulated investment product.

4. DeFi Coin (DEFC) – Overall Uptrending DeFi Coin with Promising Future

DeFi Coin is the native token for the DeFi Swap exchange, and several factors help it top our list of the best DeFi coins to buy right now. First, we liked its solid reputation thanks to its close association with one of the best DeFi platforms – DeFi Swap. We also list it here because there are three distinct ways of making money with DeFi Coin. The first and most obvious involves buying and holding the digital asset and waiting for its value to appreciate.

When reviewing DeFi Swap, we mentioned that DeFi Coin has some of the yields on the platform. You may, therefore, consider buying a DeFi coin with the intention of staking it on the DeFi Swap platform for 1, 3, 6, or 12 months, and stand to gain as high as 75% in annual interest. Alternatively, you can make money with DeFi coin on the platform when you contribute liquidity to different pools. The most popular is the DEFC/BNB pool. Here, you will share the fees earned when individuals interact with this pool.

The third way through which you stand to make money when you buy DeFi Coin is by sharing in the DeFi tax. Note that every time someone buys or sells DeFi coins, they are charged a 10% tax. This amount is pooled and distributed to DeFi Coin holders – based on the amount of their holdings.

Is DeFi Crypto Safe?

Like any other asset class, there are multiple risks to investing in cryptocurrencies. The most talked about has to be their higher-than-average volatility, which often exposes investors to great losses. If you, for instance, had invested in either Uniswap or Aave at their peak price in 2021, you would be staring at more than 90% in losses today.

One may also argue that cryptos aren’t the safest investment class, especially in comparison to deposits into a bank or hedge fund, because cryptos aren’t insured. This is in contrast to fiat deposits into financial institutions, which are insured – up to $25,000 in the US and Australia and up to £85,000 in the UK.

Note, however, that crypto trading platforms have made significant strides in addressing the insurance risk. These include regularly auditing their systems, providing regular proof of audit reports, and holding client digital funds in ultra-secure offline vaults. Some – like Binance – have gone ahead and set up private insurance funds for their platform users.

Conclusion – Beginners Guide to DeFi Crypto

DeFi platforms and coins have played a key role in attempting to reshape the finance and investing world. They have provided investors with lucrative alternatives to the centralized banking and investment industry. In the above guide, we have discussed everything you need to know about DeFi crypto and DeFi investing. You now know what DeFi is and how different DeFi platforms work. You also are familiar with the top DeFi platforms as well as the best DeFi crypto.

Cryptoassets are a highly volatile unregulated investment product

FAQs on DeFi Crypto

What is DeFi in Crypto?

DeFi in crypto refers to decentralized finance, which refers to a wide range of financial services offered on public blockchain networks. It seeks to onboard the many services offered by centralized financial institutions – from operating interest accounts to long-term investing.

Our analysis points to Uniswap as having the most potential. The DeFi token has not only maintained an overall uptrending price action but also has one of the most promising future owing to the changing regulatory environment and user sentiments towards CeFis.

The ideal DeFi platform should present you with multiple passive income-generating avenues, pay relatively high-interest rates on stake crypto, and share competitive rates on crypt swaps. Today, some of the best DeFi platforms include e DeFi Swap exchange, Uniswap, and Crypto.com.

Yes, DeFi coins are a good investment because they not only help you grow your investment fast but also because they also give you near-absolute control and access to your funds.

Yes, DeFi World presents you with multiple passive income-generating avenues that you can leverage and help you accelerate the rate at which you grow your capital. Some of the most popular ways of making money with DeFi include staking, crypto interest accounts, yield farming, and crypto lending.