What are DeFi Tokens?Decentralized Financing (DeFi) is a system that allows one to borrow fiat using cryptocurrencies as collateral. No KYC is required and the deal is sealed with a smart contract.
In most cases, DeFi Tokens are native governance tokens behind a specific lending protocol. These tokens are earned by users for lending and borrowing assets.
CompoundCompound (COMP) Tokens are the native governance token of the Compound lending protocol. Users can earn COMP Tokens by lending and borrowing assets. Furthermore, COMP Tokens also give holders governing and voting rights when it comes to making important protocol decisions. By giving COMP holders voting powers, it ensures the platform is truly decentralized.
COMP Tokens performed extremely well in 2020. With the listing of the token on Coinbase on 19 June 2020, the price of COMP reached an all-time high of $353.18 from a low of $63.93 within a 24-hour timeframe.
ChainlinkChainlink (LINK) is a decentralized oracle that links data from the real world to the crypto world. The oracle acts as a data feed that connects off-blockchain data to blockchains. The data is secure, trustworthy and truly decentralized.
What makes LINK unique is its token usage ecosystem. If you want to get the Chainlink nodes to gather data, you can do so by means of a smart contract. You can then pay for the service with LINK Tokens. So, the more tokens there are in a Chainlink node, the more reputable that node becomes.
DAIDAI stablecoin is popular on the MakerDOA lending platform and is used as collateral. Since it is pegged to the US Dollar, it offers traders stability and transparency since it is decentralized.
The advantage of having a stablecoin in DeFi is that you are guaranteed that the value of your money stays the same. Whilst the prices of other cryptocurrencies may vary due to market fluctuations, stablecoins like DAI generally maintains a stable value. So, when lending and borrowing money, you can rest assured that when using DAI as collateral, the amount in question will stay the same.
Speaking of the MakerDOA platform, Makercoin (MKR) is the second token that allows users to lend and borrow money. MKR coins serve as payment for the ‘stability fee’ when taking out a loan on MakerDOA. However, DAI remains the most popular of the two.
In conclusion, 2020 was the year that DeFi took off and with good reason. There is a great need for freedom from the monetary control of centralized institutions when it comes to financing. Be sure to load up on your favourite DeFi coins on AltCoinTrader to enjoy the many benefits of financial freedom.