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18 December 2020

How to Make a DeFi Token?

In this article, we’ll consider key points that will help you with the creation of your own DeFi token: what it is, how it works, what types there are, who develops them and how. We’ll also specify the cost of the DeFi project development.

Specifics of DeFi projects

Decentralized finance (commonly referred to as DeFi) is a sort of financial services, which doesn’t rely on centralized governing bodies (a director, a board of directors) or centralized intermediaries (states, central banks, banks). Instead, it utilizes decentralized forms of government and validation, which are being implemented with the help of blockchain technologies and smart contracts.

The most obvious example of DeFi is a cryptocurrency payment system Bitcoin, which is an alternative to traditional fiat currencies. Bitcoin doesn’t have either a central governing body or the main validator. Its functions are either automated or decided on democratically.

Another example is the Compound project, which allows lending other users its cryptocurrency (with remuneration in a form of a percentage). This blockchain platform uses smart contracts to collate lenders and borrowers at certain criteria that are written in open-source software. Besides, these smart contracts automatically adjust interest rates depending on the current market situation.

The following things are common among Bitcoin, Compound, and other DeFi:

Business idea and mission of the project

Examples of DeFi projects with a division into niches. Source

Business idea. If you want just to make a DeFi token, then it will be another decentralized cryptocurrency that nobody needs because there already are Bitcoin and other coins. The token should have some value – value proposition – to be in demand. Anything can be this value – from a very cheap transaction to improvement of the world environmental situation (many people blame Bitcoin with its PoW protocol for not being environmentally friendly).

Otherwise speaking, you need to launch a financial service that would use your DeFi token. Only such a project will have a chance of succeeding. The best option, in this case, is to recreate traditional financial instruments in a decentralized architecture. They usually implement such features as funds transfer and payment – cryptocurrencies, buying and selling various tokens – cryptocurrency exchanges, token loan – credit P2P markets.

Start-ups related to insurance (InsurAce), derivatives (Opyn), asset management (Balancer), rewards points for purchases (Fold), and interest-bearing deposit opening (Celsius Network) have been emerging in recent years. Then the DeFi service market continued to expand through decentralized variations of other traditional financial services.

You better choose a financial instrument, which had not yet been implemented in DeFi, when launching your DeFi token. That’s how you’ll be able to become a natural monopolist and get maximum advantages and benefit at the start. You should choose a financial instrument for your blockchain project based on these criteria:

Token launch and DApps development

Choice of a blockchain platform. If you just need to launch a DeFi token with certain parameters, it’s quite simple. It’s enough to choose one of the blockchain platforms and follow its instruction on launching a new coin. The most obvious option is the Ethereum network, which more than half of all blockchain start-ups choose. Here’s the instruction that will tell you how to do it.

Blockchain platforms to launch tokens on:

Search for the DeFi developer. Broad expertise in finance and professional skills in the development of blockchain-based DApps are required for the launch of your decentralized financial platform, app, service, or smart contract. This is a reason that you need a development company, which will take over the technical side of this process.

Here’s how to find such a technical partner:

The actual development process. The process of development of your DeFi service will look differently depending on several aspects: a chosen blockchain network, a programming language, an app feature, a consensus mechanism, etc. In any event, the development will consist of the following stages:

  1. Business analysis. At this stage of DeFi service development, a business analyst defines the requirements for the project, customer expectations, and business goals, and creates a technical specification. The specification describes each detail of the development process: from people, who are responsible for development and communication, to frameworks, libraries, and operating systems.

  2. UI/UX design development. Designing the visual component and user interface of your DeFi project. Depending on the complexity, design may take up to 20% of the total development time.

  3. Preparatory phase. Consists of settings of a development environment, API, server part, and architecture — everything that the development will include.

  4. Development + testing. As a rule, these steps take place simultaneously as one continuous process. When MVP is ready, the QA engineer will run a full regression test to make sure that everything is working.

  5. Deployment. Website creation and first clients’ attraction in any way possible. If this is a mobile service, then it’s the launch of your DeFi app on the App Store and Google Play Store.

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