In 2020, as a result of the economic crisis caused by the proliferation of COVID-19, the global financial system is facing an increasing number of problems. The authorities of the main countries implemented monetary policy for quantitative easing, which led to the devaluation of fiat currencies and the loss of public confidence in them. At the same time, the profitability of bank deposits fell to a record low.
Meanwhile, traditional banking options are gaining popularity. Among them are decentralized financial products: cryptocurrency exchanges, wallets, credit, trade and custody services. Its undeniable benefits are high interest rates on deposits, which can provide huge profits to owners in just a few months, and instant loans that can be borrowed without documentation or KYC verification.
While the demand for DeFi products is skyrocketing, it can be difficult for inexperienced users to understand the decentralized solutions that are emerging on the go. An analysis of the market-leading DeFi services reveals the challenges that beginners may face and the true potential of decentralized finance.
MakerDAO: Trade, loans and savings
MakerDAO is the oldest decentralized service on the market. It allows users to borrow, shop and earn savings using the original Dai stablecoin, which is pegged one by one to the US dollar. MakerDAO reminds us of a bank as it provides loans secured by a cryptocurrency, but it does not require good paperwork, checks or credit history. Users can pledge their savings in ETH or any of the ten cryptocurrencies accepted by the platform and receive a specific amount from Dai in return.
Once you get the loan, tokens can be used for anything, even if they are mostly used for investing. To repay the loan, you must repay the same amount Dai that was received earlier, plus a small percentage on top. If the price of ETH increases during this period, the user earns when the amount of ETH security increases compared to the price in USD.
How easy is it to get a secured loan from MakerDAO? To borrow assets, the user only needs to have an active crypto wallet from MetaMask, Ledger, Coinbase, Trezor, WalletConnect or D’cent and a balance of at least $ 40. But the total loan amount is always limited by a 150% guarantee. … This means that it is impossible to receive more than 66% of the security. Simply put, the borrower receives 66 cents when he deposits a dollar.
MakerDao offers low borrowing rates for some of the supported coins.
Overall, the platform is good to use, although finding the right tools can be a bit difficult as the user interface is cluttered and constantly redirected to mirror pages. For example, platform services are located in Oasis’ decentralized application, and the deposit rate is only displayed after the wallet is connected and the registration transaction is completed.
Ease of use is complicated by the presence of only two deposit currencies: Dai and ETH. In addition, MakerDAO is easy for all users who have interacted with cryptocurrency exchanges before.
Aave: fast unsecured loans
Aave allows users to take out loans to get cryptocurrency guarantees and offer cryptocurrency with interest. The interface has become more convenient, the website is unified and simplified, it supports more than 10 wallets.
Aave has a selection of 19 coins and offers quick loans without collateral, but you have to repay the loan and pay interest in the same block. Such operations are only available to experienced arbitrage professionals who know how to make money on short-term exchange rate differences.