DeFi Market Overview

DeFi is decentralized finance (also known as open finance) where anyone can access and use financial applications anytime, anywhere without censorship. of any centralized organization (bank, brokerage, etc.).

In the DeFi space, there are financial services similar to traditional financial markets, such as Borrowing, lending, and trading… But these services operate on a public network, ie. Anyone with an Internet connection can access it. Developers rely on these networks to create and release protocols and projects to make it easier for users to use decentralized financial services.

7 important pieces in the DeFi market

Here are 7 key pieces in the DeFi market:

Stablecoins

A stablecoin is a cryptocurrency that is stable because its value is pegged to a stable asset such as a fiat currency (like USD), a commodity (like gold), or possibly another cryptocurrency. It takes advantage of blockchain technology and peer-to-peer (P2P) value transfer to help mitigate harmful effects from price fluctuations in the cryptocurrency market. In the current market, there are 3 popular stablecoins as follows:

• Centralized stablecoins are issued against stable collateral such as fiat money (USD). For example USDT, USDC…
• Decentralized stablecoins are issued against the collateral of crypto-assets. That is, to mint these stablecoins, users will have to mortgage a larger amount of crypto assets than the value of that stablecoin. Example: DAI – users must collateralize ETH to borrow MakerDAO’s DAI.
• Decentralized algorithm stablecoins will rely on algorithms to maintain a stable value, instead of staking any other asset. Example: UXD…

Lending & Borrowing

Decentralized lending & borrowing platforms also play an equally important role in DeFi. Two main audiences in Lending & Borrowing platforms:

• Lender: They take on the role of depositing their idle assets into Lending & Borrowing platforms to lend to others. After a period of time, they will receive the original principal along with the profit calculated at a certain interest rate.
• Borrowers: They are the people who will borrow money from the lender and pay the interest on that loan.

New Lending product is supported on Remitano, if you are interested in this puzzle piece, you can try out Remitano’s Lending product!

In addition, you can refer to some other Lending & Borrowing platforms: Aave, Compound, Anchor Protocol, Abracadabra…

Decentralized Insurance

DeFi is decentralized by nature and is not controlled by any intermediary. Therefore, decentralized finance has many risks. Therefore, decentralized insurance is one of the indispensable pieces, it helps to protect users from some potential risks in DeFi applications.

Decentralized insurance will have 3 main target groups:

• Insurance buyers: These are people who want to be safe and avoid the risks of using DeFi-related products.
• Risk assessors: These are people who use their own funds to protect other users. When the buyer spends money to buy insurance, this money will be divided among the risk assessors.
• Claims reviewers: They will undertake the task of evaluating, and considering whether the insurance buyer’s claim is accepted or not.

These groups of subjects will coordinate with each other and share risks in the entire decentralized insurance system. Some of the prominent projects in this puzzle are Armor, Nexus Mutual, InsurAce…

Decentralized Exchanges (DEX)

DEX (Decentralized Exchange) are decentralized cryptocurrency exchanges, allowing users to buy and sell peer-to-peer on the blockchain network without going through any intermediaries. Prominent projects in this puzzle are Curve, SushiSwap, Uniswap, PancakeSwap…

Liquidity Mining

Liquidity Mining is a form of making profits by providing liquidity to DeFi protocols, especially decentralized exchanges. Participants providing liquidity will receive attractive rewards, usually the project’s governance tokens. This is also a form for projects to encourage investors to use their platform.

Decentralized Oracle

Oracle is a system that provides real-time data and information for blockchains and smart contracts. In a simpler way, Oracle will take on the task of sending off-chain data (price information, sports …) to smart contracts. Prominent projects in the Oracle segment: Chainlink, Band Protocol, DIA…

Decentralized Derivatives

Decentralized Derivatives is a decentralized derivatives trading model based on the value of crypto assets. That is, investors trade with each other based on the price of crypto assets without having to directly own or buy the assets.

As such, the difference between traditional derivatives trading and decentralized derivatives lies in the underlying asset type:

• The underlying asset in a traditional derivative is a bond, stock, or interest rate.
• The underlying assets in decentralized derivatives are crypto-assets.
• Some prominent projects in this area are dYdX, Perpetual Protocol…

Conclusion

In the decentralized finance space, there are still many other pieces of the puzzle. The puzzle pieces listed in the article are just indispensable “trumps” for DeFi. Those are the pieces that play a role in promoting DeFi to more and more development.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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