Unleashing DeFi's Potential: What You Need to Know and How to Create Your Own DeFi App
Unleashing DeFi's Potential: What You Need to Know and How to Create Your Own DeFi App

Unleashing DeFi’s Potential: What You Need to Know and How to Create Your Own DeFi App

Cryptocurrency continues to rise as the alternative financial system of the twenty-first century. In October 2021, Bitcoin reached its highest value since May 2021, reaching $57,000. Popular retailers have begun to accept cryptocurrency payments. 

DeFi, which stands for Decentralized Finance, is one of the ecosystems that fuel cryptocurrency. With an increasing number of DeFi platforms and networks, DeFi is a competing force against traditional banks. That is why it is critical for crypto start-ups, investors, and enthusiasts to understand the system from the ground up.

This article will teach you everything you need to know about DeFi. It has advantages and disadvantages. We’ll go over the essential steps for developing a DeFi app. 

What Exactly is DeFi?

DeFi refers to blockchain-based financial services and smart contract-powered products. Smart contracts can authenticate and process transactions and trades.

DeFi’s goal is to build a fully digital native financial system. Let’s put it all together once more. When you use a debit card to make a purchase, your bank acts as the go-between (the intermediary) between you and the vendor. DeFi eliminates the middleman.

DeFi, for example, can run continuously. Settlement and clearing processes in stock trading can take up to three days to complete, even longer if the transaction is international. The transaction can be completed securely at any time using DeFi’s peer-to-peer network. There is no need for a bank’s approval.

Also Read: Definitive Guide to DeFi Yield Farming for Beginners

What Are the Benefits and Drawbacks?

Anyone interested in cryptocurrency will know the advantages and disadvantages of investing. These include high volatility and a lack of regulation, the risk of monetary loss if a wallet file is corrupted or a password is lost, and the possibility of significant investment returns.

DeFi also requires its users to weigh the benefits and drawbacks of any investments or start-up ventures if they want to be safe and successful. Let us dissect them:

Pros

  • The DeFi system is accessible to anyone with an internet connection. DeFi, unlike traditional banks, does not require know-your-customers (KYC) and bureaucratic information. For example, identification or credit scores. 
  • You are in charge of your finances. Smart contracts, rather than human intermediaries, can help you qualify for loans and manage your investments.
  • DeFi enables open-source accessibility by recording activity and transactions on the blockchain.
  • It is nearly impossible to manipulate blockchain records.
  • There are numerous growing peer-to-peer lending platforms and protocols.

Also Read: Revamping E-commerce Through DeFi Solutions 

Cons

  • If a blockchain hosting a DeFi project becomes unstable, the DeFi project inherits the instability of the blockchain.
  • Even minor flaws in smart contract coding can result in monetary loss and hacking exposure.
  • Interoperability gaps between blockchain ecosystems can silo and segregate projects, stifling their mass adoption.
  • The absence of insurance to protect investments from tampering.
  • DeFi is ultimately your responsibility; there is no intermediary. This means that DeFi still lacks the tools necessary to address any human errors or mistakes.

What Will the Future Bring?

DeFi had grown to an $80 billion industry by 2021. Many people wonder if DeFi is the future of Finance. Sure, DeFi has some obstacles to overcome first.

Nonetheless, 1.7 billion people remain unbanked globally. DeFi, which requires only an internet connection, could be an option for millions of unbanked people. 

The total value locked (TVL) of crypto in DeFi is increasing. Now is the time to take advantage of this new technology. You may be wondering where to begin as a start-up. What makes a DeFi app popular and successful?

Don’t be concerned. We are here to assist. Our key steps will cover building a DeFi app from the ground up. 

Also Read: DeFi Ecosystem | Importance Of DeFi Ecosystem In The Cryptocurrency Economy

How to Build a DeFi App

First and foremost, the Discovery Phase:

It’s critical to recognize that DeFi is already a large, interconnected ecosystem. As a result, your app will need to work with various other platforms and protocols.

Assume you create a liquidity pool. That liquidity pool will need to integrate with the protocols and contracts of other vendors, such as Curve.fi.

That means you’ll have to learn everything about the market’s behemoths. These include the vendors such as Compound and Aave. It is critical to define the scope of your integrations and technical requirements. This is because it will influence the type of app you can create.

So, learn everything you can about the market and the major players. Determine the type of app you’re developing and what makes it unique. After that, you can think about the app’s main features. Incorporating all of this into a Software Requirement Specification (SRS) will aid in the consolidation of your goals and needs.

Also Read: DeFi Protocol Development Can Help Your Blockchain Business Grow

Design, UI, and UX:

The bottom line is that your app must be visually appealing and functional for your users. Concerning new UI/UX, DeFi currently lags far behind centralized banking and lending apps. That is why you require a highly skilled UI/UX designer or designers on your team. Users are likely to abandon an app if it does not meet their needs the first time they open it.

That will be another challenge for you. How do you assemble your team? Do you outsource or create everything in-house? DeFi necessitates a broad range of knowledge and skills. These are critical assets for your team.

Smart Contracts:

Smart contracts serve as the adhesive that holds DeFi together. As a result, their development is critical for your app. Here is a list of what you should include in the Defi smart contract development phase:

They must include all the actions and steps a user may take.

  • They must be dependable and hacker-proof.
  • Ensure your contract is written so it can be updated at any time.
  • The more features you include in your contract, the more complicated it becomes. However, you must keep the contract’s code transparent and easy to read. It will also make integration with other smart contracts easier.
  • Unit testing and security audits will ensure that any bugs or errors in the contract are removed.

Quality Control:

Your smart contracts will be tested using unit testing and security audits. However, you must still try the entire system. Here’s a list of everything you’ll need for quality assurance:

  • Begin by running the network locally and testing the app on your computer. Make a fork of the Ganache mainnet. This will give you a lite version of the Ethereum network that is not connected to the mainnet.
  • You should also test on an Ethereum testnet, as Ropsten and Kovan have done.

Project Launch and Follow-up:

Your app has been developed, tested, and is ready for release. Maintenance is critical once it is on the market. The size of your team will determine how much care you can keep up with. Maintenance is in the hands of your in-house team. 

That is why it is best to work with a design team that will be with you from the beginning to the end. 

DeFi has limitless potential. The question is, where do you see yourself in the future with DeFi? Contact the leading Defi development services provider right away. They can help you locate the blockchain solution designed for your future.