For example, DAI and USDC are both pegged to the US dollar.ĭeFi is sometimes known as “Lego money” because you can stack dApps together to maximise your returns. Buy cryptocurrencies known as stablecoins, which are pegged to the value of a particularly currency or commodity.Take part in a no-loss lottery on PoolTogether, where everyone gets their money back and one lucky participant wins all the interest that has accrued in a shared pot.Create and exchange derivatives of real-world assets such as currencies or precious metals on Synthetix.Bet on the outcome of events using Augur.Borrow and lend cryptocurrencies to earn interest using platforms such as Compound or Aave.Other DeFi services now in use allow you to: These are entirely peer-to-peer, without any company or other institution providing the platform. One area in which in which these decentralised applications (dApps) have taken off is cryptocurrency trading on decentralised exchanges (dexs) such as Uniswap. So if you had bought £1,000 of Aave tokens in August 2019, they would now be worth nearly £200,000.ĭeFi, most of it built on the ethereum blockchain network, is the next step in the revolution in disruptive financial technology that began 11 years ago with bitcoin. For example, Synthetix Network Token has increased more than 20-fold, and Aave almost 200-fold. Numerous tokens have risen in value by three or four times in a year – and some considerably more. It is now around US$15 billion, almost double the beginning of the month. This has driven a massive rise in the value (market capitalisation) of all the tradeable tokens that are used for DeFi smart contracts. Since the beginning of August alone it has risen by US$2.9 billion. You can listen to more articles from The Conversation, narrated by Noa, here.īetween September 2017 and the time of writing, the total value locked up in DeFi contracts has exploded from US$2.1 million to US$6.9 billion (£1.6 million to £5.3 billion). This refers to financial services using smart contracts, which are automated enforceable agreements that don’t need intermediaries like a bank or lawyer and use online blockchain technology instead. One area in cryptocurrencies attracting huge attention is DeFi or decentralised finance.
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