Top 5 DeFi Tokens to Invest in for the Long Term

Handy Tips / 19.06.2021

The world of crypto is growing, and now people are eager to get in on the frenzy. Crypto stands for all cryptography applications, including DeFi, which mirrors traditional banking and financing concepts except on blockchain technology. The advent of DeFi tokens has caused a frenzy reminiscent of the booms of bitcoin and other cryptocurrencies in 2017.

DeFi tokens have joined the race in disrupting traditional finance by allowing the following: lending and borrowing within a peer-to-peer network without any intermediaries, savings in interest, insurance, and provides an excellent opportunity for investors interested in investing for the long term. 

The type of DeFi token to invest in depends on your use case and preferred taste. Nevertheless, investing in DeFi tokens is an added advantage since smart contracts will provide extra protection against day-to-day human errors. So, if you are looking for the best DeFi token to invest in, here are some of the best reputable tokens in a frenzy.

What are DeFi Tokens?

Decentralized finance (DeFi) encompasses the use of conventional financial tools except on the Ethereum blockchain. Here, financial products become available on a public decentralized blockchain network without any middlemen. 

Therefore, DeFi Tokens are a type of value that resides on blockchain technology used for exchanges and are backed by the US Dollar. When compared to cryptocurrencies, DeFi tokens have similar similarities like seamless transferability and transparency. On the other hand, cryptocurrency is an asset, whereas DeFi tokens are considered financial tools.

DeFi tokens can make traditional finance concepts more decentralized, trustless, and automated. The power of smart contracts – encoding the terms and activities necessary for the functioning of financial services – provides the framework for the functioning of DeFi tokens. DeFi tokens are parallel to traditional financial tools. 

Still, they harness the potential of blockchain technology to focus on recreating new standards of transparency and access while trying to mitigate costs for financial services. Thanks to the automation of financial tools, DeFi tokens boast of the fast processing of transactions.

In the cryptocurrency craze, the advent of new projects happens almost every day, and there is a vast number of anonymous developers claiming to be veteran experts. True enough, some DeFi tokens end up reaching greatness and changing the financial realm forever. Sadly, they loom large. The bitter truth is that others end up being scams that end up stealing from investors. Nevertheless, here are the top five best DeFi tokens to consider investing in in the long term.

MakerDAO

MakerDAO has now consolidated its place as the first on the list according to defipulse. It consists of two tokens: the MKR token and the Dai token. The primary token is the MKR token, with a parallel fluctuation as cryptocurrencies. It’s for paying interest on the loans, and it allows MKR token holders to govern the Marker protocol. 

Having over 400 apps and services integrated with Dai, it is discernible why the Maker token stands out from the rest. What’s more, Maker can let you take loans at 0.5% annual interest. That’s crazy.

Is Maker best for investing in for the long term? Well, first, we leverage its stable coin, Dai. Regardless of its criticized natural fluctuations, it makes the long transition from “Fiat to Crypto” much faster by having a 1$ currency. Finally, we have MKR, where you are guaranteed transparency and easy access to make secured loans in just minutes.

Aave

Aave follows with a current liquidity protocol of slightly over $14 billion. It is a non-custodial liquidity market protocol that permits users as depositors or borrowers. For depositors, they provide liquidity to the market to receive a passive income, whereas borrowers get to borrow in either a continually or uncollateralized manner. Aave is open source – allows you to create a third-party service or application to interact with the protocol.

You deposit your preferred asset and amount in Aave, which generates a passive income depending on the market borrowing demand. Interestingly, your deposited assets act as collateral when you need to borrow.

Uniswap (UNI)

Launched in 2018, Uniswap allows anyone with an Ethereum wallet to trade decentralized tokens. It’s preferably the best to buy and sell tokens for veterans in the craze. Also, it assists newbie users in creating a market for any token and can fund the liquidity. Once a user, you can trade ERC20-based tokens and generate fee income as a market maker that provides liquidity to enable token swapping. 

Simply put, your expenses on the transaction process are cut to a minimum since there are no intermediaries involved. Added advantages like low fees, high liquidity, external wallet incorporation, and total control over your private keys allow Uniswap to be a lucrative DeFi token to invest in

Compound

The compound is a mammoth DeFi token that acts as lending and borrowing decentralized blockchain. Once you are a user, you can earn interest on your cryptocurrencies by depositing them into different Compound pools. 

The Compound pool gives you cTokens for your deposited tokens, which you can redeem at any time of your choice. cTokens have an exchange rate that increases over time, so your initial investment will always garner interest. Compound proves to be another worthwhile DeFi token to invest in for the long term.

Chainlink

The number two DeFi token by market cap has a decentralized network that provides reliable, tamper-proof inputs and outputs for complex smart contracts on any blockchain. Chainlink is built to retrieve data from any API and incorporate it with any blockchain, now and in the future, to invest long term. 

Made under transparency, you can independently monitor and verify Chainlink’s open-source code as well as monitor the performance of its oracle network.

Wrapping up

As crypto continues spawning new strands in the future, there’s no doubt that DeFis are here to stay. Like the incident between Netflix and traditional cable television, DeFis will take over traditional finance in the future, and it’s time for you to hop on the bandwagon and enjoy the benefits it brings. 

The removal of bureaucracy and intermediaries made possible by smart contracts on the Ethereum blockchain sounds too good to decline. However, no cryptocurrency is without its concerns, and DeFi tokens are no different. Beware of scammers on the hunt for your investments. Call the pros if you must, but if you filter the tokens mentioned above, you will find one that fits you, then spring it to life and invest in it for the long term.

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Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, he covers trendy issues on digital currencies.