Decentralized finance (sometimes referred to as DeFi) is a sort of financial service that does not rely on centralized governing bodies (such as a board of directors or a director) or centralized intermediaries (states, central banks, banks). Instead, it uses blockchain and smart contract technology to implement decentralized forms of governance and validation.
Bitcoin, a cryptocurrency-based payment system that offers an alternative to conventional fiat currencies, is the most prominent instance of DeFi. Bitcoin is devoid of both a central regulatory body and the main validator. Its functions are either determined automatically or democratically.
Another illustration is the Compound project, which permits Defi to lend his bitcoin to other users. This blockchain network utilizes open-source smart contracts to match lenders and borrowers based on predetermined parameters. Moreover, these smart contracts alter interest rates automatically based on market conditions.
The following qualities are shared by Bitcoin, Compound, and other DeFi:
Decentralization: The defining characteristic of all DeFi initiatives is that the project will be overseen by users or a group of managers elected by network participants. In addition, smart contracts can be used to decentralize particular functions, such as issuing and destroying Sogur coins.
Open-source: Open-source software products are transparent, which increases their credibility because you can see how they operate. Moreover, if you disagree with the majority’s development plan for an open-source project, you can modify the source code and create your own “legal” project (token, app, service).
Process automation: In Bitcoin, aspects such as currency issuance, transaction validation, a blockchain record of transaction history, and numerous other functions are assigned to the system itself, therefore automating these processes. Ethereum has reached a new level thanks to smart contracts, which can automate all generic processes such as loan granting, interest payment, invoice filling, and customs clearing.
Maximum inclusiveness: Most DeFi services are international, and there are no barriers to entry (usage) – anyone may use bitcoin. The Compound lends to everyone, from the Democratic Republic of the Congo farmer to an entrepreneur in the United Arab Emirates.
Mission and Business Concept of the Project
If you merely wish to produce a DeFi token, you will make another decentralized cryptocurrency that no one needs, given that Bitcoin and other coins already exist. To be desirable, a token must have value – a value proposition. This value could be anything from a negligible transaction to a significant environmental improvement (many people blame Bitcoin with its PoW protocol for not being environmentally friendly).
Alternately, you must launch a financial service that utilizes your DeFi token. Only such a project has the potential for success. The optimal approach in this situation is to recreate traditional financial products in a decentralized architecture. They often comprise money transfer and payment services – cryptocurrency, buying, selling, etc.
Insurance (InsurAce), derivatives (Opyn), asset management (Balancer), rewards points for purchases (Fold), and interest-bearing deposit opening (Celsius Network) are examples of recent start-ups. The DeFi service industry began to expand as decentralized forms of other standard financial services emerged.
You should choose a financial instrument that has not yet been included in DeFi when launching your DeFi token. This is how you can become a natural monopolist and immediately receive the most benefits and advantages. You should select a financial instrument for your blockchain project using the following criteria:
There is sufficient demand
It all boils down to the client’s need for a conventional financial instrument to cover project development costs and profit over time.
Discontentment among users
It should ideally be tied to the centralization of the financial instrument. Venezuelans, for instance, are dissatisfied with their national currency due to hyperinflation. Still, bank customers are dissatisfied with banks due to data breaches, exorbitant fees, high-interest loans, or excessive bureaucracy.
There will be minimal opposition
Due to the immaturity of the decentralized banking industry, there are currently unfilled or virtually unfilled niches. Because software quality requirements and marketing expenses are lower, launching a project in this industry is simpler.
The development of a specific cryptocurrency DeFi token is relatively simple and inexpensive, making it accessible to a large number of individuals. On the other hand, the construction of a decentralized bitcoin exchange, credit market, or insurance firm will need a significant amount of time, money, and effort and will be restricted to businesses with a substantial budget and competent management.
Here’s how to discover such a technical partner:
Check out LinkedIn, Clutch.co, Appfutura, Goodfirms.co, Adnify, Extract.co, Contractiq, The Software Network, They Make Apps, and CrunchBase.
Who to search for: a defi token development company with substantial expertise in developing financial market applications.
Examine the developer’s portfolio, test their products, and read reviews on Goodfirms, Clutch, and other similar sites.
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