In today's digital currency market, DeFi tokens are gradually becoming the focus of investors. Compared with traditional Bitcoin, DeFi tokens have shown unique advantages in many aspects, which are not only reflected in their technical characteristics, but also in their applications and development potential. This article will explore in depth from the three aspects of technology, application and prospects, revealing the three main reasons why DeFi tokens are superior to Bitcoin.

Technological Innovation: Smart Contract Technology of DeFi Tokens

The reason why DeFi tokens have attracted so much attention is due to the advanced smart contract technology behind them. DeFi platforms represented by Ethereum use smart contracts to realize the vision of decentralized finance and provide users with safer and more efficient financial services. Compared with the single function of Bitcoin, DeFi tokens have realized more diversified financial applications through smart contracts, such as lending, trading, stablecoin issuance, etc., providing users with more diversified financial tools.

Taking MakerDAO as an example, its stablecoin DAI based on Ethereum smart contracts has successfully achieved anchoring with traditional currencies, providing users with a decentralized stable value storage tool. This financial innovation based on smart contracts not only reduces the cost of financial transactions, but also improves the efficiency and transparency of financial services, making DeFi tokens technically ahead of Bitcoin.

Widely applied: the financial ecology of DeFi tokens

In addition to its technical advantages, DeFi tokens also excel in the construction of financial ecology. The application scenarios of DeFi tokens are gradually enriched, covering multiple fields such as lending, trading, and liquidity mining, forming a complete financial ecosystem. In this ecosystem, users can participate in financial activities through various DeFi applications to achieve asset appreciation and risk management.

Take Uniswap as an example. As a decentralized exchange, it realizes the rapid exchange of assets through smart contracts, providing users with an efficient and secure trading experience. At the same time, Uniswap's liquidity mining mechanism has also attracted a large number of users to participate, promoting the circulation and development of DeFi tokens. This open and decentralized financial ecology provides a broad space for the application and development of DeFi tokens, making them more dynamic and attractive in the market.

Broad prospects: the development potential of DeFi tokens

As DeFi tokens continue to grow and develop, their future development prospects are also highly anticipated. As an emerging force in financial technology, DeFi tokens are gradually changing the landscape of traditional finance and bringing new development opportunities to the financial industry. Against the backdrop of the continuous maturity and popularization of blockchain technology, DeFi tokens are expected to further expand their influence in the financial field and become an important part of the digital economy era.

Taking Aave as an example, its decentralized lending platform provides users with a new way of lending, realizing the liquidity management and asset appreciation of digital assets. In the future, with the promotion and popularization of DeFi tokens around the world, its status and role in the field of financial technology will be further highlighted, bringing new impetus and opportunities for the development of the entire financial system.

In general, DeFi tokens are gradually becoming the new favorite in the digital currency market with their advanced technology, rich applications and broad prospects. In contrast, although Bitcoin still has an important position as one of the representatives of digital currency, its single function and application scenario can no longer meet the diverse financial needs of users. Therefore, it can be said that DeFi tokens are superior to Bitcoin in many aspects, and the future development space and potential are exciting.

The emergence of DeFi tokens is leading a new trend in the digital currency market. With the continuous advancement of technology and the continuous enrichment of application scenarios, DeFi tokens are expected to become an important driving force in the digital economy era, bringing more innovation and possibilities to the financial industry. Let us wait and see and witness the glorious moment of DeFi tokens!

The four most famous international exchanges:

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Note: The above exchange logo is the official website registration link, and the text is the APP download link.

3 Reasons DeFi Tokens Are Outperforming Bitcoin! Decentralized Finance (DeFi) is a fast-growing sector in the crypto industry, and while the DeFi ecosystem has yet to surpass the size of the general cryptocurrency market, the new way to borrow, lend and save has received positive media coverage and “praise.”

DeFi shows great promise, and the market is beginning to reflect this, as many DeFi-based tokens have performed strongly in 2020, with some tokens up more than 60% in the past 5 days.

According to a report provided to Delphi
Digital clients, tokens of popular applications in the DeFi space have shown huge gains, both in the long and short term. For example, London-based DeFi lending platform Aave has performed much better than Bitcoin in the last week, up 66.46%. MakerDAO, another popular DeFi-based token, also gained 25.60% last week.

DeFi Token Performance Source: Delphi Digital

Decentralized exchange (DEX) tokens like Kyber, Loopring and Bancor have also seen double-digit gains. Although the general growth of the DeFi space has been accompanied by meager transaction volumes compared to Bitcoin’s (BTC) daily transaction volume, this raises the question of what is causing the price of these assets to rise so significantly?

Ethereum 2.0 is coming

Just like Bitcoin, the Ethereum network has been dealing with some scalability issues that could affect the growth of DeFi to a large extent, as most activity occurs on the Ethereum blockchain.

However, Ethereum’s plan has always been to deal with these issues in a multi-phased approach. Ethereum 2.0 is the next upgrade for ETH, and it may be the most important one.

The upgrade is expected to take place sometime this summer, and as DappRadar Communications Director Jon
Jordan explained, it will have a huge impact on the entire Ethereum ecosystem, including the DeFi space. Jordan told Cointelegraph:

“Two of the main barriers to making Dapps on Ethereum easy to understand and use are gas fees and slow block times. Ethereum 2.0 will fundamentally solve these problems, making Ethereum Dapps more like using the standard web and mobile apps we are all used to.”

Ethereum 2.0 will bring sharding and staking solutions that are designed to solve many of the network’s current and future problems, which will not be fully implemented until 2021 or later, as Phase 2 of the upgrade must be released.

The upcoming Phase 0 implementation is not expected to have a huge impact on the network, however, the initial rollout of Ethereum 2.0 staking could be a good reason for investors to be bullish.

Unprecedented Network Activity

As Cointelegraph reported, interactions with the Ethereum network, either through simple transactions or smart contracts, recently reached an all-time high. According to data from Delphi
Digital, total gas usage on the Ethereum network has been rising since the beginning of 2020.

According to ETH Gas
Station, USDT and various DEXs have been the main users of gas. As a result, according to a recent report from Messari, DEX tokens are outperforming centralized exchange tokens such as Binance Coin (BNB) and Bitfinex (LEO).

DEX tokens outperform centralized tokens by five times Source: Messari

While gas usage is at an all-time high, the same cannot be said for trading volume. This suggests that DeFi and other Dapps are becoming increasingly popular on the Ethereum network in terms of actual usage.

The increase in use cases for DeFi networks could explain why the prices of these tokens are rising.

In fact, Aave was the biggest winner last week, with the second largest amount of locked funds, with $81 million deposited.

More projects and users is a bullish sign

Data shows that the DeFi space has significantly outperformed Bitcoin last week and over the past three months, despite institutional investor interest in Bitcoin reaching an all-time high.

However, DeFi tokens are also becoming an increasingly popular investment tool, allowing for high returns through lending, as well as increased value through locking in lending applications.

Total value locked in the DeFi space (USD) Source: DeFi Pulse

According to Evgeny
Yurtaev, founder of the DeFi project Zerion, DeFi appears to be growing exponentially. Yurtaev recently shared a graph on Twitter showing that the number of new assets has almost doubled in the last month, exceeding 1,000 for the first time ever.

New DeFi assets per month

Not only has overall activity and the number of projects grown, but the number of DeFi users has also reached an all-time high of nearly 600,000, according to Dune Analytics.

Number of Ethereum DeFi users over time Source: Dune Analytics

The future of DeFi looks promising

While the growth in adoption is a good sign for Dapps and Ethereum as a whole, it also shows some pressing issues in Ethereum, especially around congestion and scalability. The growth in price could be seen as a bet on Ethereum 2.0 and its ability to solve these issues in the coming years.

However, Cointelegraph has also reported on the impact of Ethereum 2.0. on DeFi, especially on how collateralization outpaces lending, which is an unlikely but looming danger for DeFi in the coming years. When asked about this, Stani Kulechov, CEO of Ethereum-based DeFi application Aave, told Cointelegraph:

“It’s hard to say at this point, it really depends on the incentives. If the incentive to secure the network is higher than the yield on depositing to Aave, then it will come out. As the network becomes more secure, the incentives may decrease, so lending may be a way to compete with Ethereum 2.0 staking. Time will tell.”

The first iteration of Ethereum 2.0 may continue to inspire bullish sentiment towards DeFi, and this may change in the future if staking becomes very profitable.

It’s also possible that the two concepts will coexist, even if staking becomes the more popular of the two. For now, there’s a lot to look forward to in both Ethereum 2.0 and the DeFi space.