How is DeFi currency different from other cryptocurrencies?

Asked 2 years ago

Hi, I have traded and invested in cryptocurrency for the past two years. Can someone please tell me how DeFi currency is different?

Abraham Camacho

Wednesday, March 23, 2022

DeFi is a sub-niche within the cryptocurrency space that aims to cut out middlemen in finance by replacing them with smart contracts. DeFi specific tokens are still cryptocurrencies.

However, they differ in their offering capacity. Regular cryptocurrencies like Bitcoin allow holders to become a part of the blockchain network while benefitting from positive price action. "DeFi currencies" provide more profound utility, allowing holders to participate in platform-based activities.

They govern the protocol by facilitating decentralized finance options like lending, borrowing, yield farming, staking, etc. DeFi protocols may use native tokens (DeFi currency) or stablecoins to help facilitate transactions/reward distribution on their platform.

It is worth noting that most DeFi protocols are built on regular blockchain networks like Ethereum, Solana, or Cardano. So, in the end, these protocols and their "DeFi currencies" still depend on the base layer of smart contract-powered blockchain networks.

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