If you are aware of blockchain affairs, you might have heard about the anticipations and benefits of blockchain technology to the financial sector. It is anticipated that blockchain will be taking the financial system by storm. Many fintech investors have already affirmed that blockchain will continue to be present in the future and will not easily fade away. Blockchain will reform the financial sector like the Internet reformed the media industry. The DeFi blockchain and its layers will transform the financial system globally.
The existing finance sector is quite complex, and this complexity can increase the chance of risks associated with it. As per many fintech visionaries, enabling financial products on public blockchain networks where no central intermediary or bank will be regulating will help reduce the current systematic risk factors in the financial system. The main motive for introducing DeFi blockchain technology in the financial system is to free the sector from central regulations and authority.
Centralized finance brings greater applications and innovations like P2P lending, crypto loans, decentralized exchanges, and many other new applications. Most DeFi dApps currently are built on the Ethereum network, the second largest network based on the crypto blockchain. DeFi blockchain is becoming increasingly popular since it is shaping the future of the financial industry. Today, most of the emerging and evolving blockchain protocol contributes to the growth of the DEFI ecosystem. The new and innovative blockchain protocol, such as Cardano, Polygon, solo, etc., supports the development of centralized, new, and automated financial decentralized applications or services powered by smart contracts and helps strip conventional intermediaries such as banking institutions. This guide will inform you about the top blockchain platforms based on deFi development apart from Ethereum.
Overview of decentralized finance or DeFi
Decentralized finance or DeFi, is becoming a famous use case within the current blockchain ecosystem. DeFi applications are decentralized financial software that is built with the help of blockchain technology. The main reason why DeFi has risen into prominence is that it has showcased its potential and capabilities for making financial services and applications more transparent, accessible, and open to all.
Defi developers build plenty of financial products like money markets, stablecoins, oracles, noncustodial exchanges, etc. The future of DeFi development is a bright and wide range of DeFi products like DEX aggregators, permissionless options for trading, no-loss lotteries, credit risk protocols, yield aggregators, and insurance platforms for borrowing and lending purposes with fixed rates of interest on loans. Technological stack is used for DeFi development for matching and mixing projects and building high-value applications. There are three layers deFi technological stack comprises. They are as follows
- Application layer
This front-end layer is visible to all the users.
- Protocol layer
This application protocol defines all the specific rules and regulations that are to be followed.
- Base layer
This blockchain protocol enables data and value to get recorded as well as transferred across different chains.
What are the top deFi blockchain protocols?
Ethereum
The first DeFi application was Bitcoin, allowing users to own and control value over a decentralized network. Bitcoin allows users to send the value anywhere worldwide. Ethereum helped scale DeFi development and paved the way for the DeFi application to grow and become a global decentralized financial system so that end users can access controllability and visibility over their own money. Ethereum provided defi solutions and products to users to access the best alternative to banking options or local currencies and get global exposure to markets.
The DeFi solution provided by the platform Ethereum proved an excellent alternative to various financial services. People use these solutions to send money anywhere worldwide, borrow funds without or with collateral, trade crypto tokens, and have stable access to currencies. Ethereum helps in generating numerous opportunities to create new and innovative financial products for users by expanding their fees and making money more programmable, thereby allowing users to schedule payments, perform borrowing and lending activities, invest in index funds, and perform other types of functions that they could not do with the use of Bitcoin. Ethereum is an excellent DeFi development platform and is a personal favorite choice for developers who can build these centralized applications for varieties of financial services based on crypto, such as borrowing, commanding lending interest, private payments, etc.
Some DeFi projects that Ethereum powers are as follows:
Aave
Users can participate in this decentralized noncustodial liquidity protocol as borrowers or depositors. On offering liquidity, depositors can earn passive income, whereas borrowers borrow money undercollateralized or over-collateralized. It is one of the most famous DeFi applications powered by Ethereum.
Compound
This DeFi protocol is powered by Ethereum and helps developers build open financial applications. Digital asset holders can borrow and lend crypto against some collateral. Depositors help maintain the liquidity of the platform by adding assets and earning compounding interest.
Solana
The next important blockchain network which helped in increasing scalability, speed, and lowering the fees of decentralized finance is supposed to be Solana.
Several DeFi projects were built on Solana, which helped strengthen the deFi ecosystem. DeFi market share has shifted from applications based on Ethereum to layer one chain of Solana because Ethereum included high expenses. Solana helps to create a proof of history consensus mechanism, which eliminates congestion and keeps the cost of financial transactions comparatively low in contrast to Ethereum. Solana is in the right direction to foster a strong defy ecosystem. Top DeFi projects like decentralized exchanges, asset management tools, decentralized lending, margin trading, etc., are based on Solana.
Some important deFi projects that are built on Solana are as follows
Port Finance and Solend
These two deFi projects built on Solana function as decentralized banks that are quite famous, like Aave and compound Ethereum project. Port finance uses a liquidity mining program and enables users to earn the governance token of the protocol as well as interest paid on the deposited assets. Solend helps users to borrow money against assets.
Saber
This DeFi protocol based on Solana does not require users to deposit amounts equal to the assets, unlike the Ethereum liquidity pools. Users can keep assets like wrapped assets or stablecoins with low spillage level.
Cardano
Cardano blockchain technology was founded in the year 2015. As soon as its main net went live in 2017, it opened up a vast ecosystem to promising ranges of decentralized applications. Developers are shifting to the Cardano platform to use smart contracts’ new functionality that helps them develop exciting and innovative D app projects.
The main objective of Cordano is to build a strong network that overcomes the shortcomings of scalability and interoperability in the first and second-generation blockchain network. The prime focus of Cardano is to become a trustworthy and reliable platform to create scalable and secure drops along with real-world applications and use cases.
Cardano aims to create an economic identity to billions of decentralized applications, which helps manage value identity and governance. Cardano team has taken a peer-to-peer approach, which is a cautious and slow method for building dApps.
Some Cardano based Projects for DeFi are-
ERGO DEX
It is a smart contract platform or non-custodial exchange built for dApp and enables users to share their liquidity and trade on any crypto exchange that is built on the Cardano blockchain network.
Empower
This Cardano-based project helps leverage the power of decentralized finance so that the shortcomings of reasonable housing in Africa can be duly addressed. This platform helps to break certain factors such as high-cost capital, lack of funding, lack of supply of reasonable housing, high-cost building, etc.
Polkadot
The Polkadot ecosystem consists of the Polkadot relay chain at its base with parachain network at layer 1. Heterogeneous blockchains built over the network of Polkadot are known as parachains. Today, varieties of DeFi projects are based on the Polkadot chain and parachains. There are powerful features that come along with the Polkadot ecosystem that helps in supporting deFi projects. One such important feature is interoperability, which is the most crucial feature of Polkadot. To facilitate interoperability or communication between parachains, several cross-chain messages are passed by Polkadot to develop defi projects.
DeFi projects built on Bitcoin and Ethereum can communicate with the polkadots ecosystem via bridges.
The prime feature of the Polkadot is interoperability, which is a layered network of chains. The base layer is the relay chain that governs the Polkadot ecosystem’s consensus mechanism. Parachains connected to the Polkadot relay chain can benefit from the economic security offered by validators of the relay chain. Parachains are interoperable with one another; therefore, they can act as independent chains and have their governance and tokens so they can be built as private or public networks or as a development platform for building decentralized applications. The Polkadot ecosystem provides full flexibility to parachain and has only one mandatory condition: to abide by the consensus mechanism of Polkadot.
Some important DeFi projects built on Polkadot are Acala, Equilibrium, Staff, and Bifrost. polkadots support the present defy concerts and help create new concepts such as dSWF or decentralized sovereign wealth fund. It is one of the most commonly adopted blockchain ecosystems that help to develop liquid staking solutions which is an important subcategory of defi.
Avalanche
The next blockchain network that helps strengthen DeFi development is an avalanche. Avalanche is a smart contract based on a blockchain platform that helps reduce cost and increase eco-friendliness and transaction speed. It is one of the best open, programmable, fastest smart contract platforms, which helps to build a wide variety of solutions for asset issuance, debt financing, deFi, digital collectibles, etc. This platform is quite compatible with apps, assets, tools of Ethereum and provides certain benefits like low fees, high speed, and high throughput. Avalanche helps create a bridge to facilitate a good connection with the network based on Ethereum. Different deFi projects like Securitize, TrueUSD, SushiSwap, bZx, and Reef are integrating into the avalanche blockchain. The finality characteristics of avalanche protocol help to develop the decentralized financial application. It is much better than Ethereum since the latter achieves finality within one minute, whereas the avalanche needs only one second to achieve finality.
There are three blockchains of avalanche-
X chain or exchange chain
This blockchain transacts and creates avalanche assets, and fees for transactions are paid in the form of AVAX.
C-Chain or contract chain
Blockchain represents the feature of smart contracts of avalanches and enables developers to create decentralized applications by leveraging the security and scalability benefits of the platform. This blockchain is compatible with the Ethereum virtual machine. Anyone on avalanche can deploy Ethereum smart contracts.
P chain or platform chain
This helps to create L1 and L2 blockchains that are known as subnets. Key chains help manage avalanche subnets and track the validators completely.
Polygon
Polygon is a blockchain network establishing itself as a premium deFi platform.
The last name of Polygon was Matic which witnessed tremendous growth in the year 2021 and is now emerging to compete with significant blockchains and enter the deaf ecosystem.
Polygon’s success factors are your capability to provide cheap and fast transactions on the blockchain network.
Developers prefer to run DeFi dApp on this blockchain network since it is much cheaper than other blockchain networks, such as Ethereum. Polygon is much more time effective compared to Ethereum, and This is why Polygon is a popular and major deFi platform today. DeFi platforms like Aave, SushiSwap, Curve, and 1inch are networking with this blockchain. Although Ethereum is an undisputed home for defy development, users are looking for the best alternative protocols of the Ethereum network since Ethereum is expensive and slow due to high traffic. Polygon is the best choice for deFi developers as it is faster and cheaper to build and connect to other blockchain networks.
Suppose your business enterprises require you to build deFi solutions. In that case, you need to hire a reliable blockchain development company with a dedicated team of developers and help you offer solutions across various blockchain protocols such as Polygon, Cardano, Polkadot, avalanche, Solana, etc. You must choose a company that helps you provide services like DeFi smart contract development, DeFi dApp development, DeFi lending platform development, DeFi wallet development, DeFi exchange development, and DeFi token.