Real DeFi Use Cases

Real DeFi Use Cases

“DeFi dOeSn’T hAvE aNy ReAL uTiLiTy” - every DeFi skeptic ever Let’s put that argument to rest… Here’s 8 ways you can use DeFi! (and 2 developing economies using it rn)

💲 Payments

You can send money around the world as easy as sending an email.

Examples: Strike (send BTC), Tornado (send ETH), Sablier (stream ETH)

*To send or receive payments, you will need a wallet. FYI, each blockchain (Ethereum, Solana, Polygon, Avalanche, etc) has their own type of wallet.

🔀 Lending & Borrowing

You can earn interest on your crypto through lending. Decentralized lending works without either party having to identify themselves. Borrowers put collateral into a smart contract, where it is kept until the loan is repaid. So, there is no bias affecting whether or not you can get a loan.

There are two ways two borrow in DeFi:

  1. Peer-to-peer = a borrower borrows directly from a specific lender.
  2. Pool-based = lenders provide funds (liquidity) to a pool that borrowers can borrow from.

Examples: Compound (pool-based), AAVE (pool-based), Flash Loans (no collateral), PoolTogether (no-loss lottery)

🤝 Exchanges

You can swap crypto tokens 24/7. Tokens can give you access to different web3 applications. There are centralized (CEX) & decentralized (DEX) exchanges. More on the differences here.

Examples: Coinbase (CEX), Binance (CEX), Uniswap (DEX), Curve (DEX)

💰 Stable currencies

Stablecoins are cryptocurrencies without the volatility. They allow anyone to transact & store their wealth with a stable currency (ex: Latin American adoption).

The 3 types of stablecoins (and their pros / cons)

*Learn how they maintain their stability here.

1. Fiat-Backed

  • Pros: safe against crypto volatility & price changes are minimal
  • Cons: centralized & requires auditing to ensure company has sufficient reserves

2. Crypto-Backed

  • Pros: transparent & fully decentralized (no company holding reserves)
  • Cons: less stable than fiat-backed & value of crypto collateral can change quickly

3. Algorithmic

  • Pros: no collateral needed & controlled by a public algorithm
  • Cons: most risky & you need to trust the algorithm (Terra was algorithmic)

Examples: Dai (crypto-backed), USDC ($USD-backed), Ampleforth (algorithmic)

📊 Advanced Trading & Prediction Markets

With decentralized trading you get access to global liquidity, the market never closes, and you're always in control of your assets. You can use prediction markets and margin trading.

Examples: Polymarket (prediction), Augur (prediction), dYdX (margin)

💼 Portfolio Management

Track your portfolio and crypto finances using intuitive apps.

Examples: Zapper, Zerion, Rotki

🛡️ Insurance

Get coverage without dealing with an insurance company. And get protected against crypto hacks.

Examples: Etherisc (all types of coverage), Nexus Mutual (just coverage from hacks & bugs)

🌍 DeFi use in Latin America & Kenya

DeFi will help developing economies the most. It’s already helping those people out!

Example 1: Latin America uses crypto to combat hyperinflation. Crypto use rose by 1,370% from 2019 to 2021! Many use $USDC & $BTC for everyday transactions & storing wealth

Example 2: Kenyan farmers use crypto insurance (Etherisc) for reliable, affordable, & transparent insurance. Traditional insurance is so bad that only 3% of farmers use agricultural insurance.

*Bonus tip! Listen to this podcast to learn more about crypto & its use cases