What Is DeFi?
More than 70% of citizens in developing countries use the traditional financial system. However, banks and credit institutions have created a kind of monopoly, which leads to inflated prices for services, multiple eligibility criteria, etc. This is where a fairly large player came into play, completely changing the financial sector. With the advent of crypto, users can have a complete control over their money and gain access to a range of services due to the world of DeFi.
Important! DeFi or decentralized finance is a financial technology which includes not only the DeFi market, but also instruments that have become an alternative to the traditional banking system.
The core principle of DeFi is decentralization, which means users don’t need to exchange personal information and rely on government or intermediaries.
Interesting fact! DeFi aims to fix the TradFi disadvantages - high fees and centralization, giving users access to money with lower fees and a decent level of security.
What Are DeFi Coins?
DeFi coins can be described as money for DeFi space. These coins are used instead of fiat money to keep the decent level of decentralization. DeFi coins are much like a digital version of regular coins, since transfer its value through a financial transaction.
DeFi coins are built and most often named after their blockchain networks. These coins perform a huge number of functions in the DeFi system - while some coins store assets, others can be used for exchange, transfer, investment, cross chain payments, participation in DeFi protocols and dApps, and much more.
Factors to Consider When Choosing DeFi Coins
The crypto market can be quite difficult to understand for new investors. Therefore, before choosing DeFi altcoins to invest in, pay attention to the following factors:
- Market Capitalization. This factor shows the total market value of a coin, its size and stability in the ecosystem. A higher market capitalization means more investors and more liquidity, making the coin a less volatile investment. A low market capitalization, in turn, can indicate perceived growth potential, but at the same time increased risk and volatility.
- Project Team and Development. An experienced team with a good reputation has a significant impact on the project’s success. That is why it is important to understand and study what experience the team behind the project has, how often updates occurred, how involved the community was, etc., so to understand the coin’s potential.
- Use Case and Real-World Application. Use cases determine the practical usefulness and demand for a coin. Evaluate the possibility of using the coin in various areas such as lending, borrowing, trading or other DeFi services to understand its potential. Coins with real use cases are more likely to not only grow, but also remain relevant.
- Community and Support. Active community participation can not only drive adoption of the coin, but also provide feedback for its improvement. Also, community engagement on social media and other platforms indicates support and generates interest, which influences the success of the project.
- Security and Audits. Regular audits from reputable third-party firms help identify and address vulnerabilities, protecting investors from potential losses. Increased attention to security provides users with additional assurance that their investments are safe.
Top DeFi Coins to Invest in 2024
Mode (MODE)
Mode is a L2 DeFi solution built on Optimism, created to grow dApps through innovative economic systems and directly reward its users.
MODE is a native ecosystem token that allows users to participate in the platform’s governance. Besides, the token takes part in the Mode commission distribution mechanism, and stimulates developers and users within the ecosystem. The token price is $0.02.
Mode is an ever-growing ecosystem that integrates new offers and tools, thereby demonstrating its potential, making MODE a good investment in 2024.
Solana (SOL)
Solana is a fairly popular platform for running crypto apps. Its advantages are energy-efficiency, decentralization, speed, scalability as well as multiple tools and use cases. Solana competes with Ethereum in some ways and offers lightning-fast speeds of around 50,000 transactions per second compared to 15TPS for Ethereum.
SOL is the native cryptoco of the platform, which operates as a governance token and is necessary for paying transaction fees and staking. Users can buy and sell SOL on most major exchanges at a price of $169.03.
Solana is in out list of good investment altcoins due to its high transaction throughput, low fees and scalability, which is achieved due to its unique Proof of History consensus mechanism. Besides strong development support, Solana’s evolving ecosystem contributes to SOL’s long-term potential.
Filecoin (FIL)
Filecoin network is a decentralized peer-to-peer platform that operates as a marketplace where developers can rent storage space and be served by a globally distributed network of computers. Filecoin's goal is to create a reliable, cheap and fast infrastructure for storing data.
FIL is a coin that powers the network and is needed to pay for use and provide storage services. It ranks 36th in the world in terms of market capitalization, and the token price is $4.17.
Filecoin and its innovative approach to decentralized storage makes it one of the best investing options on the market. As demand for secure and efficient data storage solutions continues to grow, Filecoin uses blockchain to provide a decentralized marketplace for data storage, reducing dependence on traditional cloud providers and potentially lowering costs.
Maker (MKR)
MakerDAO is a decentralized organization on Ethereum that allows users to lend and borrow crypto. The MakerDAO DeFi lending platform uses overcollateralization and operates through a set of smart contracts that allow lending and borrowing without central authorities.
MKR is a governance token used in the MakerDAO ecosystem, allowing users to vote on decisions and updates to Maker, as well as collateralize loans within the Maker system. The cost of the token is $2,603.56, and the TVL almost reaches $5.5 billion, which indicates the demand for the coin. As demand for decentralized lending continues to grow and MakerDAO is one of the leading platforms, MKR is also positioned for growth.
Source: Notum
Blast (BLAST)
Blast is Ethereum L2 blockchain and protocol that was created to provide profits to owners of ETH and stablecoins on the Ethereum network. Since most other L2 solutions do not provide such features, Blast is an innovation in the DeFi world.
BLAST is an ecosystem’s token that is needed to expand functionality, encourage participation, and power the platform. Besides, BLAST is used in in governance and facilitates ecosystem’s transactions. DeFi token holders can stake BLAST to receive rewards and contribute to the security of the platform. The token price in July 2024 is $0.015.
Due to its important role in the Blast ecosystem and its innovative solutions, the token also has growth prospects, making it a good investment option.
Pendle (PENDLE)
Pendle is a DeFi protocol that allows users to trade future earnings through the AMM system. Its uniqueness is that it separates the underlying yield-generating token into Ownership Tokens (OT) and Future Yield Tokens (YT). This way, users can trade and earn income.
PENDLE is a protocol utility token that is used to manage and pay transaction fees. PENDLE holders can vote on protocol changes and stake the token to receive rewards. The token price is $3.63.
By allowing users to trade future yield from their crypto assets, Pendle is a unique platform with great potential, making its native token an excellent investment option.
Optimism (OP)
Optimism is a scalable L2 solution from Ethereum developers for scaling applications. Its advantage is that it provides access to almost all the functions of Ethereum, but is much cheaper.
OP is the Optimism’s governance DeFi crypto, which is needed to pay fees and allows token holders to participate in decisions regarding the platform’s future. Besides, token holders can also stake OP and generate extra income. The token price is $1.68.
Since Optimism solves Ethereum's core problems of transaction costs and scalability, the platform remains in demand, making its native token an attractive investment option.
NEAR (NEAR)
Near Protocol is a blockchain platform for making fast and scalable infrastructure for dApps. Since the protocol uses intonational technologies, it greatly facilitates transactions, which is a plus for any dApp.
NEAR token is the native cryptocurrency of the platform, necessary for carrying out transactions on the platform. In addition, the token is used to reward validators and developers, and token holders can participate in decisions related to Near Protocol. The token price is $5.45.
As dApps continue to grow and evolve, and Near Protocol offers intonation scalability solutions, it will remain in demand, making NEAR a good investment.
Source: Notum
Ondo (ONDO)
Ondo Finance is a project launched by Coinbase that connects TradFi and DeFi, offering unique financial solutions. ONDO is the governance token of Ondo Finance as well as its Flux Finance protocol. The token ensures that the community influences the future of the project. Moreover, token holders can take part in votes regarding the platform updates. The token price is $0.9313.
Due to its connection with Coinbase and the innovative approach of combining TradFi and DeFi, Ondo is a unique solution with good prospects, which also promotes its token as a good investment.
Toncoin (TON)
Toncoin is an unique blockchain project created by the team behind Telegram. Its mission is to transform dApps and services by providing users with a convenient ecosystem with low fees and processing millions of transactions per second.
TON is the native DeFi coin of the Telegram Open Network (TON). It plays a vital role in facilitating transactions, smart contracts and network operations, that in turn increases ecosystem’s speed. TON currently ranks 9th in market capitalization, and its price is $6.60.
Since the Telegram Open Network leverages Telegram's huge user base for potential adoption, Toncoin is one of the best investment options. Its integration into Telegram can increase demand and significantly increase its value.
Source: Notum
Analyzing the Potential of Emerging DeFi Coins
Analysis of new coins on the market also comes down to assessing the team behind the project, their experience, successes and mistakes. In addition, pay attention to token’s uniqueness and how it differs from competitors, how it can surpass existing alternatives.
Besides, pay attention to the existing security protocols that ensure the reliability and scalability of the new coin. Study the project's whitepaper, as well as a roadmap, to evaluate its future and prospects. Also remember about community engagement, which also affects the success of the coin and its distribution. Finally, consider market trends and coin’s use cases to understand the potential demand for the coin.
Risks and Challenges in DeFi Investing
- Bugs and vulnerabilities. Since DeFi protocols are built on smart contracts, they can be subject to bugs and exploits. Thus, a vulnerability or error in the code can lead to large financial losses.
- Market volatility. Most DeFi assets are pretty unstable, meaning prices can change wildly over short periods. Such volatility can lead to significant financial losses even for experienced investors.
- Liquidity risks. Some DeFi projects suffer from low liquidity, which can make it difficult to buy or sell a specific coin and can lead to financial losses.
- Operational risks. DeFi platforms often face issues such as network congestion on the underlying block chain, resulting in slow or failed transactions. Also, user errors, such as loss of wallet private keys, also often lead to irretrievable loss of funds.
Tips for Safely Investing in DeFi Coins
Before investing, pay attention to the project's news, team and developers, used technology, as well as community support to evaluate its potential. Also remember to diversify your portfolio. Investing multiple coins instead of putting all your money into one asset will help you avoid big losses.
Using Reputable Platforms
Reputable and well-known platforms typically offer enhanced security, transparency, a large community, as well as support a wide range of coins and investment strategies. In addition, they offer a transparent and reliable trading environment.
Important! New or unverified platforms may put you at high risk of fraud and result in fund loss.
Look for platforms with good user reviews, proven audits, and a history of reliable performance. If you don't know where to start, you can pay attention to platforms such as Binance, Uniswap, Aave, Compound, Notum and others.
Source: Notum
Conclusion
The diverse world of DeFi offers a huge number of popular projects that allow users to access a wide range of services. Tokens of these projects such as MODE, SOL, ONDO, NEAR and others show their demand and growth trend, which makes them good options for investment.
However, investing in cryptocurrency, like most other types of investments, will always involve certain risks, especially when dealing with highly volatile assets. It is important to study and be aware of these risks in order to remain in control of your coins.