What are DeFi coins and tokens?

The main goal of all decentralized finance (DeFi) projects is to provide traditional financial services (loans, asset exchanges, savings accounts) without a third-party intermediary.

DeFi tokens (Financial instruments in the form of services and applications built on the blockchain.) are various native cryptocurrencies for automated decentralized platforms that operate using smart contracts. They give users access to a set of financial applications and services where there are no intermediaries. The DeFi token market was estimated to be worth $114 billion in early 2022, but the sector is the fastest growing cryptocurrency market (a year ago, the volume was $89 billion).

What are DeFi coins and tokens?

DeFi coins and tokens are often referred to as interchangeable. They are similar in many ways but also have several big differences.

A DeFi coin is similar to a digital version of fiat (money), and its purpose is to transfer value during a transaction. DeFi coins are created based on blockchain networks and often carry their name. For example, Uniswap, Maker, Chainlink, Compound, Aave, Ankr.

Tokens also have value, but not necessarily financial value. Utility tokens can be used to provide access to a resource, and asset tokens can represent physical assets such as real estate. There are also non-fungible tokens (NFTs), which represent ownership of one-of-a-kind digital items (though not only that) — drawings, videos, music, social media posts, and so on. DeFi tokens can be created based on existing blockchain networks (as opposed to coins).

There are also governance tokens that give voice and control to users who have them. These tokens empower the community to make decisions about future roadmaps, important changes, and new network functionality.

That is the power of tokens in DeFi, which is why they are gaining popularity. And some of them have cross-chain features across different DeFi platforms. Cross-chaining is a new technology that aims to transfer values and information between various networks.

What are the risks of DeFi tokens?

Even when buying DeFi tokens through centralized exchanges (CEXs) such as Coinbase, there are still the same risks associated with those tokens’ native DeFi protocols.

DeFi tokens can be severely affected if a critical vulnerability appears in the underlying protocol. In October 2021, the price of Compound’s control token, COMP, fell after a hacker exploited a bug in the code and stole $114 million in tokens. Nevertheless, part of the amount was returned to investors.

Tokens are also affected by the same factors as other cryptocurrencies: changes in the project, changes in management, or team members. All of these can change the mood of the market.

In March 2022, legendary DeFi developer and founder of yEarn Finance Andre Cronje and his colleagues announced their departure from the industry. Immediately afterward, DeFi tokens associated with Cronje’s project plummeted in value.

Where to buy DeFi tokens?

Many exchanges allow you to buy and sell DeFi coins and tokens. Coinbase, eToro, Gemini, and Voyager are the most reliable and time-tested.

For beginners, Coinbase is the best choice. This exchange has the most straightforward user interface. Also, the Coinbase Earn program rewards inquiring minds with cryptocurrencies for learning about blockchain technology.

Gemini is better suited for those investors who want to play the long game. It is on this exchange so that you can find a lot of tools for passive portfolio growth. The Gemini Earn program allows you to earn interest on the cryptocurrency stored in your Gemini account. And the interest is accrued exactly in the currency in the account.

Best DeFi coins to buy

Tamadoge (TAMA)

This coin allows investors to earn rewards in the form of cryptocurrency in games. It is also the native token of the Tamaverse, the ultimate Play-to-Earn platform. To participate in the game, you must buy NFT to feed your virtual pets and help them develop. For the highest level of development, players receive rewards in the form of TAMA, which can be sold for other cryptocurrencies. Tokens can be found on the exchanges LBank and UniSwap. Tamadoge coins are special because the developers maintain their value by burning 5% of all tokens spent on their platform. There were a total of 2 billion in stock.

Battle Infinity (IBAT)

Battle Infinity developers have combined a virtual world with gameplay elements, creating six platforms on which users can earn while playing. Players can team up and play with other players, compete in battle arenas, and make their image with unique items, while getting all the excitement through a VR headset. The most persistent players are rewarded with transaction fees (these are distributed to IBAT owners). IBAT is a BEP-20 token of the Binance Smart Chain network. During the pre-sale, all available coins were sold out in 24 days. After listing PancakeSwap, the token’s price increased by more than 700%, and the market value reached $60 million.

DeFi Coin (DEFC)

This is the native token of the new DeFi Swap decentralized exchange (DEX) for swapping, steaming, and yielding. DeFi Swap has one of the best interest rates for DEFC holders. Holders are also offered several options to earn rewards from the 10 percent tax on DeFi Coin sales and purchases. Of this amount, half is distributed to DEFC holders, and half goes back to DeFi Swap’s liquidity pools. The token is available for purchase on the BitMart cryptocurrency exchange.

Lucky Block

Lucky Block is a platform for crypto and NFT contests. All games use a smart contract, so everything is transparent, and cheaters won’t get through. The results obtained cannot be changed. The Binance smart chain powers Lucky Block. A pre-sale of V1 tokens initially raised the crypto equivalent of $5 million. And in a month of trading, the value rose by more than 6000% to $0.00961. After that, the project launched its V2 token and removed the 12% transaction fee. The price rose another 400% after listing on MEXC in mid-August. An even greater increase in price is expected after the token is listed on the Gate.io exchange.

Uniswap (UNI)

The platform allows traders to exchange tokens on a peer-to-peer basis. No centralized party is involved when buying or selling crypto assets through Uniswap. Instead of a traditional order book, the platform operates an automated market maker model (AMM). To put it very generally, on Uniswap, the AMM sets prices for tokens based on a wide range of data: it takes into account volume, demand, and market capitalization. The UNI platform’s native token is market capitalization among the top 30 digital assets.

Tips for investing in DeFi coins

Many DeFi on the list originated in 2020, as the market is very young. According to CoinMarketCap, the total value of all 500-plus DeFi coins already exceeds $137 billion. But the overall market capitalization of the entire cryptocurrency industry is nearly $2 trillion, so Defi coins are still in their early days.

If you’re new to the world of cryptocurrencies, entering the world of DeFi tokens is worth starting for building a balanced portfolio. Invest only a predetermined percentage of your income in cryptocurrencies. This should be an amount you can afford to lose at any time.

Please remember, we are not giving financial advice. It’s all just general advice that you may (or may not) heed.

Investing in DeFi can start with lending and borrowing assets. There are only three steps to do this:

1. Set up a cryptocurrency wallet. It will be used to store, send, and receive DeFi coins. They come in different forms (we wrote more about them here). For example, a popular one is MetaMask. It is both a wallet, an exchange, and a browser extension. MetaMask supports Ethereum and can connect users to various DeFi protocols.
2. Buy DeFi coins. Most protocols exist on Ethereum (ERC-20 tokens) or BEP-20 tokens of the Binance Smart Chain network.
3. Participate in the chosen protocol. DeFi allows you to borrow and lend assets without losing ownership of your coins. And in return, you get various rewards and bonuses.

Bottom line

Some Defi coins have performed extremely well in recent years. Projects like Decentraland, Yearn.finance, and Terra have achieved impressive growth. But few tokens and coins look quite promising at the moment.

Before investing in DeFi, be sure to do a lot of research on how to invest and research as many DeFi exchanges as possible. You can also get into lending or yield farming. However, there are risks everywhere and always. Assess them.

Accessing management rights through special tokens allows you to invest in different use cases within the project itself.