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:
- The main feature of all DeFi projects, which implies that users or a group of managers appointed by a vote of network members will manage the project. Apart from that, some features might be decentralized by smart contracts like emissions or destruction of coins in Sögur for example.
- Open-source. Software products, which are using open-source protocols, are transparent so they are more credible: you can determine exactly how they work. Besides, if you don’t like a path of development of the open-source project that is chosen by the majority, you can change the code and launch your «proper» project (token, app, service).
- Process automation. In Bitcoin, features of coin emission, transaction validation, a record of transaction history in blockchain, and many other things are assigned to the system itself, i.e. automated. In Ethereum, it was brought to an even higher level due to smart contracts, which can automate all generic processes: loan granting, interest payments, filling in an invoice, customs clearance, etc.
- Maximum inclusiveness. Most of the DeFi services are cross-border and there are no barriers to enter (use) — everyone can use a bitcoin. The Compound gives loans to everybody — from a farmer in Congo to a venture capital investor in the Arab Emirates.
Business idea and mission of the project
Examples of DeFi projects with a division into niches. Source
. 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:
- Sufficient demand. It’s about customer demand for a traditional option of a financial instrument, which has to be sufficient to cover the costs of project development and be profitable later.
- Users’ dissatisfaction. In an ideal scenario, it should be associated with the centralization of the financial instrument. For instance, as the Venezuelans are dissatisfied with their national currency due to hyperinflation or as banks’ clients are dissatisfied with banks because of leakages of confidential data, high commissions and high-interest loans, or excessive bureaucracy.
- Minimum competition. The decentralized finance market is young; therefore, there still are unoccupied or almost empty niches. The launch of your project in such a niche is easier because it lowers requirements for the quality of software and the cost of marketing efforts.
- Reasonable cost. It’s relatively easy and cheap to create a simple cryptocurrency DeFi token so it's available to many people. Whereas the launch of a decentralized cryptocurrency exchange, credit market, or insurance service will take a lot of time, money, and effort, which is available only to companies with a large budget and effective management.
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
- Offers DApps developers an open-source platform for distributed computing. It has become popular due to the tools to launch new tokens, smart contracts, and decentralized offers. It has been working since 2013.
- A corporate variation of Ethereum blockchain, which is created by JPMorgan bank for inter-bank transactions. It’s excellent for the work with apps that require a high speed of processing.
- Hyperledger Sawtooth. Offers a modular architecture for the launch of business apps, which can use smart contracts to automate business processes and interact with contractors.
- A decentralized environment for the token launch with a set of tools to develop DApps services of any complexity. The platform has a quite large number of adjustable parameters.
- The platform offers a great solution for decentralized hosting of apps, the main advantages of which are the high speed and absence of commissions. It’s great for the launch of DApps on the basis of IoT.
- This environment was created with more emphasis on the use of possibilities of the Internet of Things – from the creation of food delivery services with drones to the development of services of entire smart cities.
- An open-source blockchain platform R3 that is focused on the launch of apps in the public and financial sectors. It’s important to note that Corda doesn’t have its own cryptocurrency, unlike many other popular blockchains.
. 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.
- Where to look: LinkedIn, Clutch.co, Appfutura, Goodfirms.co, Adnify, Extract.co, Contractiq, The Software Network, They Make Apps, CrunchBase.
- Who to look for: a company, which specializes in blockchain and has considerable experience in app development for the financial market.
- How to check on: browse a portfolio, try the products, which the candidate has created, and see what people are writing about the developer in the reviews on Goodfirms.co, Clutch.co, and other similar platforms.
- You can read more in the article: «How to choose a blockchain development company».
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:
- 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.
- 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.
- Preparatory phase. Consists of settings of a development environment, API, server part, and architecture — everything that the development will include.
- 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.
- 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.