How to Create a DeFi App: Step By Step Guide

What is a DeFi App?

DeFi (decentralized finance) is a sector of the blockchain ecosystem that provides traditional financial services without the involvement of intermediaries such as banks, brokers, or payment systems. Instead, all transactions are carried out using smart contracts — programmable protocols running on a blockchain (most often on Ethereum, but also on Solana, BNB Chain, Avalanche, and others). Users gain full control over their assets, and the processes of lending, exchange, trading, and investing become transparent and automated.

DeFi app is a decentralized application (dApp) that provides access to financial services via blockchain. It operates using smart contracts and interacts with users through a front-end interface (usually a web application) integrated with crypto wallets (e.g., MetaMask, WalletConnect , or Phantom).

Main types of DeFi platforms

Lending

Lending platforms allow users to deposit their cryptocurrencies and earn interest, as well as take out crypto loans. Users who deposit their tokens receive regular interest payments. These funds are then lent to borrowers or used for other investment purposes.

In order to obtain a loan, users typically need to provide collateral and pay an interest rate, which varies depending on the platform. The lending and borrowing processes are similar to bank deposits and loans, but do not require a lot of paperwork and take only a few minutes. All transactions are carried out using smart contracts.

Key features:

• The ability to earn income even with small deposit amounts;
• Instant loan issuance and favorable interest rates for borrowers;
• The average annual percentage yield (APY) can reach 15% depending on the platform and cryptocurrency. Excessively high rates are often a sign of platform unreliability;
• TVL (Total Value Locked) reflects the total amount of locked (deposited) assets: the higher this indicator, the more reliable the platform.

Platform examples: AAVE, MakerDAO, Compound.

Decentralized exchanges (DEX)

DEX stands for decentralized exchanges, where users can exchange cryptocurrencies. Unlike centralized exchanges, all transactions are conducted through smart contracts, without the involvement of intermediaries, making the process truly decentralized.

You can learn more about the differences between centralized and decentralized exchanges in a separate article.

Key features:

• Confidentiality (no registration or control by a centralized authority);
• Ease of usage: simply connect a crypto wallet (possibly even via a QR code);
• Exchanges are easy — after selecting the tokens for exchange, DEX displays the transaction price;
• Interaction takes place not with individual sellers, but with liquidity pools — these are cryptocurrencies that other users have locked in the platforms' smart contracts to earn passive income.

Popular DEX: Uniswap, PancakeSwap, dYdX.

DEX aggregators

DEX aggregators work similarly to airline ticket or hotel aggregators. They collect data on cryptocurrency rates from hundreds of DEXs and automatically offer users the most favorable exchange rate, saving them time, money and efforts.

Key features:

• Aggregators allow you to access multiple DEXs and their liquidity pools through a single interface — exchanges can be made directly in the app, dApp, or wallet.
• A transaction can be split between multiple DEXs to get a better price than on a single exchange.
• Some aggregators offer features available on centralized exchanges (such as limit orders), which is useful for advanced traders. They optimize gas costs and reduce slippage, making exchanges more profitable and secure. For example, 1inch has implemented an innovative model called 1inch Fusion, which allows transactions to be made without gas fees.

Examples of aggregators: OpenOcean, velora.

A distinctive feature of 1inch is that it has gone further by offering Fusion swaps, in which liquidity is collected not only from DEXs but also from CEXs (centralized exchanges).

Liquidity Farming

Liquidity farming is similar to a bank deposit, but with potentially higher returns. Users place cryptocurrency in a liquidity pool and receive rewards. These tokens are used for exchanges, and a portion of the commissions is distributed among liquidity providers.

It is important to consider liquidity and trading activity when choosing a platform for farming.

Key features:

• Yield (APY) varies from 5% to 100%;
• On average, stablecoin farming yields 5–15% per annum, while volatile token farming yields up to 25–30%. Little-known tokens can yield up to 100%, but with high risk;
• Impermanent loss is the loss incurred if a token loses value after being placed in a pool. Upon withdrawal, the user may receive less than they invested. Losses depend on the volatility of the token. For example, if the price of a token falls by 4 times, the loss will be about 20%.

Popular DEX for farming: Uniswap, Curve, Sushiswap.

Yield Aggregators

These platforms simplify the farming process by automatically selecting the best pools and asset placement periods. Aggregators combine returns from different platforms, creating reinvestment chains. This is similar to how a fund manager works with a user's investment portfolio.

Key features:

• Each aggregator works with a limited number of pools;
• Automating liquidity placement, profit collection, and reinvestment saves time and increases profitability;
• However, the user loses complete control over the process, so aggregators must be chosen carefully, checking their reliability and the liquidity of the supported pools.

Examples of aggregators: Beefy Finance, Harvest Finance, Yearn.Finance.

Key features of decentralized finance (DeFi)

The characteristics of DeFi applications become particularly clear when considering their advantages. It is these advantages that demonstrate the value proposition of DeFi and the features that you can implement in your solutions. Below are the main features inherent in DeFi.

Permissionless access

The key feature of DeFi — is the absence of access restrictions. Unlike the traditional financial system, where access is regulated by central authorities, DeFi is based on an open access model. Anyone with an internet connection and a cryptocurrency wallet can use DeFi services, regardless of their location or the amount of funds they have. In this way, DeFi opens the doors to the financial system for virtually anyone.

Programmability

Another important feature is programmability. Most DeFi applications today run on the Ethereum blockchain, which enables the use of smart contracts. This allows agreements to be executed automatically without the involvement of third parties. In addition, the programmability of DeFi paves the way for the creation of new financial instruments and digital assets, making it possible to implement almost any traditional financial function in a decentralized form.

Transparency

One of the most obvious features of DeFi is transparency. On the Ethereum blockchain, every transaction is broadcast to the network, where it can be verified by other users. At the same time, all Ethereum addresses are represented as encrypted keys with pseudonymous anonymity. This openness of data enables deep analytics and analysis of network behavior. Moreover, most DeFi protocols are open-source projects, whose code is available for viewing, auditing and further development.

Immutability

Financial inclusion is one of the main advantages of DeFi and it is impossible without data immutability. All financial transactions and information exchange in DeFi require complete data integrity. It is achieved through the decentralized architecture of the blockchain, which protects against unauthorized changes. Immutability not only enhances security but also simplifies auditing. It is this characteristic that ensures trust in DeFi protocols and protects user data.

 Interoperability

Interoperability is another important feature of DeFi, especially relevant in today's financial infrastructure. Protocols and applications built on Ethereum can be easily integrated with each other thanks to their modular architecture. Developers can create new solutions, add features to existing protocols, adapt interfaces, and connect third-party services. This is why DeFi protocols are often compared to LEGO bricks — they can be freely combined depending on the task at hand.

Non-Custodial

A key feature of DeFi is that users manage their own assets and personal data. Using Web3 wallets, such as Metamask, users can interact directly with decentralized financial protocols. This model does not require trust in an intermediary and gives users complete control over their funds and confidential information. It creates the foundation for a completely new user-centric financial ecosystem.

Key challenges faced by DeFi projects

One of the most pressing issues remains the security of smart contracts. Since they manage user assets and protocol logic, even the slightest error in the code can lead to serious consequences — from loss of funds to complete platform collapse. Hacker attacks, exploits, logic errors, unstable integration with oracles — all these risks constantly accompany DeFi development. Teams are required to invest resources in security audits, testing, and formal code verification, which significantly increases the cost and launch time.

DeFi is undoubtedly a revolutionary technology, but it also has a number of limitations. Let's take a look at the main ones.

1. Lack of regulation and compliance

DeFi is a decentralized system that is not controlled by central or even crypto banks, government agencies, or third parties. It operates independently, which creates certain difficulties in complying with regulatory requirements. While traditional financial systems are strictly regulated due to the risks of money laundering and terrorist financing, transactions in centralized banks are carefully monitored, and if fraud is suspected, the sender's and recipient's accounts are blocked. DeFi does not offer such protection.

2. Vulnerabilities: hacks and cyber threats

Although blockchain is an immutable ledger, making it difficult to alter records, individual DeFi components remain vulnerable to hacking attacks. It can lead to data leaks and loss of funds. According to the REKT Database, losses from hacks, exploits, and fraud in DeFi protocols have already exceeded $4.75 billion. The most common type of attack is honeypots, which lure users into fake protocols.

The weak protection of DeFi protocols causes not only financial damage but also reputational damage to entrepreneurs and businesses.

3. Scalability and performance

Among the main advantages of DeFi are transparency and security. However, low performance is one of the key problems. Compared to centralized systems, DeFi applications are characterized by slow transaction processing and limited scalability. It negatively affects the speed of operations and the overall efficiency of the network.

4. Shortage of qualified specialists

Many companies working on DeFi projects face difficulties in hiring developers and experts. Creating a high-quality DeFi application requires specialists who are knowledgeable in both blockchain and financial processes. One reason for the talent shortage is the rapid development of the crypto market: developers are forced to learn and master new technologies constantly in order to remain competitive.

5. High commissions and low liquidity

In the context of cryptocurrencies, liquidity refers to the ease with which a digital asset can be bought or sold. For example, the Ethereum DApp market is flooded with various tokens, and due to constant changes in their value, it is difficult for users to choose a suitable asset. Low liquidity means high volatility and a shortage of available assets.

The consequence is an increase in transaction costs, especially in cases where the required token is unavailable and one has to overpay for the exchange. It prevents the rapid conversion of assets and reduces the efficiency of the entire financial system.

6. Smart contract limitations

As mentioned earlier, smart contracts replace intermediaries in DeFi and perform their functions. Therefore, their correctness and security are critically important. Errors in the code can lead to loss of funds or disruption of the protocol — deletion of users, theft of tokens, failures in the logic of operations.

Common problems include:

• Low performance of smart contracts
• Erroneous payments
• Operational failures

Furthermore, since DeFi places the responsibility for storing and managing assets entirely on the user, the lack of tools and interfaces can lead to human error, undermining the reliability of the entire system.

Technology stack for developing DeFi applications

Developing a DeFi application requires the usage of a complex and multi-layered technology stack, including smart contracts, blockchain infrastructure, Web3 client libraries, interface components, security tools and systems for interacting with external services. Unlike Web2 products, DeFi prioritizes transparency, security and fault tolerance, so choosing the right technological components is critically important.

1. Blockchain platform  (Layer 1 / Layer 2)

The base layer of the stack is the blockchain on which the DeFi protocol will be deployed.

Popular networks:

• Ethereum — the primary choice for most DeFi protocols due to its EVM support, liquidity and infrastructure.
• Arbitrum, Optimism, Base — layer 2 solutions built on Ethereum, offering low fees and high speed.
• BNB Chain — a high-performance EVM network with a developed ecosystem and support for BEP-20 tokens.
• Polygon PoS — a scalable network with EVM support and compatibility with Ethereum infrastructure.
• Solana — a high-throughput blockchain using the Rust programming language.
• Avalanche, Fantom, Sui, Aptos — alternative networks selected based on the scaling model, programming language and project specifics.

The choice of network affects the development language, tokenomics, UX (due to fees) and audience.

2. Languages and frameworks for developing smart contracts

Smart contracts are at the heart of any DeFi logic: managing liquidity pools, lending, staking, voting and other processes.

Main languages:

• Solidity — the de facto standard for EVM-compatible networks (Ethereum, Arbitrum, BNB Chain, etc.).
• Vyper — a more rigorous, Python-like language for Ethereum, with an emphasis on security.
• Rust — used in Solana, Near, Polkadot.
• Move — applicable in Sui and Aptos blockchains, designed with transaction security and modularity in mind.

Frameworks and development tools:

• Hardhat — a modern, powerful framework with plugins, a testing environment, and integration with Ethers.js.
• Foundry — a high-performance tool for Solidity developers with its own test runner and CLI.
• Truffle — a classic framework, less popular today but still in use.
• Anchor — for development on Solana (Rust).

3. Web3 integration and working with wallets

The front end of a DeFi application must be able to interact with the blockchain via Web3 libraries, send transactions, and process signatures.

Libraries for Web3 interaction:

• Ethers.js — the most popular and lightweight library for EVM networks.
• Web3.js — an outdated alternative, used in older projects.
• Viem — a modern, typed library for interacting with blockchains, compatible with Wagmi.
• Wagmi — React library with hooks for Web3 integration, supports contracts, accounts, networks and caching.

Connecting wallets:

• WalletConnect — a protocol for connecting mobile wallets.
• Web3Modal, RainbowKit — ready-made widgets for integration with MetaMask, Coinbase Wallet, Trust Wallet, and others.
• Ledger, Trezor — hardware wallets for secure transaction signing.

4. Front end and interface part

User interaction with the DeFi protocol should be as transparent, fast and understandable as possible. Standard web technologies are used here, but with the specifics of Web3 taken into account.

Main tools:

• React.js — the main framework for developing interfaces.
• Next.js — SSR and dApp loading speed optimization.
• Tailwind CSS — the utility CSS framework for creating responsive interfaces.
• Framer Motion — for animations and smooth UX.

It is also necessary to implement interfaces for managing transactions, displaying status, switching networks and signing via wallets.

5. Oracles and external data

DeFi applications often require external data — for example, asset prices, exchange rates, indices and volatility.

Popular decentralized oracles:

• Chainlink — market leader, reliable and proven external data provider.
• Pyth Network — particularly popular in Solana and other L1.
• Band Protocol, RedStone, Witnet — alternative solutions depending on the selected network.

Oracles are critical for ensuring the sound and secure logic of lending, derivatives and stablecoin protocols.

7. Decentralized storage and metadata

If the application works with NFTs, DAOs or requires storing files and configurations outside the blockchain, decentralized storage is used.

Storage facilities:

• IPFS (InterPlanetary File System) — a foundation for storing metadata and files.
• Arweave — a solution for long-term data storage.
• Filecoin — decentralized cloud storage.

8. Data indexing and analytics

Blockchain is not optimized for fast queries. Indexing is used to display information about transactions, pools, positions and metrics.

Tools:

• The Graph — a subgraph protocol that allows you to obtain structured data from the blockchain quickly.
• Covalent, Moralis, Dune — for more flexible analytics and data visualization.

9. RPC infrastructure and nodes

RPC providers are used to connect dApps to the blockchain:

• Infura — the standard choice for Ethereum and L2.
• Alchemy — high reliability and advanced DevTools.
• QuickNode, Ankr, Blast API — alternatives with multi-chain support.
• Own nodes — for advanced protocols requiring autonomy.

10. Security, testing and auditing

DeFi projects must pay special attention to security — compromises are unacceptable in this industry.

Tools and practices:

• Slither, MythX, Echidna — for analyzing vulnerabilities in contracts.
• Tenderly — transaction simulation and monitoring.
• OpenZeppelin Defender — contract management automation.
• Bug bounty — public vulnerability search programs.
• Audits from third-party firms— CertiK, Hacken, Trail of Bits, etc.

11. Governance and tokenomics

DeFi protocols often use governance tokens and DAO models:

• Snapshot — a voting platform with no gas commissions.
• Aragon, Tally — frameworks for managing DAOs.
• Safe (ex-Gnosis Safe) — multisig wallets for storing and distributing funds.

Implementation of governance functionality requires a well-thought-out management model and legal stability.

How to create your own DeFi application: 10 key steps

The process of creating a DeFi application can vary depending on the project's goals and the set of required features, but in most cases it includes the following stages:

1. Define the project goals

Define the main goal and scope of your DeFi application. Conduct market and competitor analysis, assess the necessary resources and plan actions to minimize potential risks that may arise during development.

2. Select a blockchain platform

Select a blockchain that will meet the technical and business objectives of the project. Consider parameters such as scalability, security, speed and transaction costs. Popular options:

• Ethereum — leader in terms of the number of DeFi protocols, smart contract support and a broad ecosystem.
• BNB Chain — low fees and high speed.
• Solana — high scalability and fast transaction processing.

When choosing, consider factors such as security, scalability, gas cost, ecosystem and available development tools.

3. Develop the interface (UI/UX)

Create a clear and user-friendly interface that simplifies interaction with your system. To improve usability, you can also conduct usability testing and collect feedback from users.

4. Smart contract development

Precisely define the terms of smart contracts — they will be responsible for initiating transactions. At this stage, it is particularly important to test error handling, data protection, and correct contract integration to ensure their stable operation after deployment.

5. Blockchain oracle integration

Connect external data sources (oracles) to expand the functionality of the application. It will allow you to execute smart contracts based on real data — from weather forecasts to information from financial markets.

6. Tokenomics development

Configure token issuance and management. Decide how tokens will be distributed among users, whether they will have voting rights and what mechanisms for interacting with tokens will be implemented.

7. Integration of crypto wallets

DeFi App must be compatible with Web3 wallets:

• MetaMask
• Trust Wallet
• WalletConnect
• Coinbase Wallet

8. Complete testing

Conduct comprehensive functionality and security testing. Regular security audits are necessary to identify and eliminate vulnerabilities before launch.

Before launching, you must complete the following steps:

• Unit testing (testing each part of the code)
• Integration testing (interaction between components)
• Load testing
• Security audit by a third-party company

At this stage, you need to make sure that the application is resistant to hacking and that all functions work correctly in combat conditions.

9. Launch and monitoring

Launch the app and closely monitor user feedback. Responding quickly to errors and suggestions will help improve the functionality and user experience of the app.

10. Support and updates

Release regular updates, including bug fixes and security improvements, to ensure the stable, reliable and efficient operation of your DeFi product.

Cost and timeline for developing a DeFi app

What each project type includes:

• Small project: basic MVP, one or two features (e.g., landing page, staking), wallet integration, basic UI.
• Medium project: tokenomics, smart contracts, decentralized voting, staking + cross-chain integration.
• Large project: full-featured platform (DEX, DAO, multi-chain architecture, custom UI, analytics, scalability).

Key DeFi trends for 2025

Decentralized finance continues to transform, offering increasingly advanced solutions at the intersection of blockchain technology, artificial intelligence, tokenization of real estate and scalable infrastructure. In 2025, DeFi will become not just an alternative to traditional finance, but a platform for launching complex financial services of the new generation.

Here are the key trends shaping the direction of DeFi ecosystem development.

1. Integration of AI and DeFi (DeFAI)

AI is beginning to be integrated into the financial logic of protocols: from algorithmic market making to automated lending and risk management. Protocols with DeFAI are able to adapt to market volatility faster, optimize decisions in real time, and reduce the risk of human error.

2. Growth of multi-chain and cross-chain ecosystems

2025 marks the transition from isolated blockchains to ecosystem compatibility: solutions such as Stargate, Synapse, and 1inch facilitate the movement of assets and data between networks. This reduces liquidity fragmentation, lowers user friction, and expands project capabilities to multi-chain access.

3. Decentralized stablecoins

Users are choosing increasingly stablecoins backed by crypto collateral or algorithms rather than centralized issuers. Such assets provide transparency, resilience to regulatory pressure, and are becoming a key element of multi-chain liquidity and financial independence.

4. Layer 2 solutions for scalability

Ethereum fees and congestion remain a limiting factor. Layer 2 networks such as Arbitrum, Optimism, and zkSync offload transactions from the mainnet, reducing transaction costs, increasing UX speed and making DeFi more accessible during high congestion.

5. Growth in institutional participation

Major players in traditional finance (banks, hedge funds, fintech) are beginning to integrate DeFi through investments, strategic partnerships and the development of institutional protocols. Their activity increases the trust and stability of the ecosystem.

Frequently asked questions (FAQ)

How to create a DeFi App?

To create a DeFi App, you need to define the concept (e.g., exchange, lending, or staking), choose a blockchain (Ethereum, Solana, etc.), develop smart contracts, implement the frontend, and ensure security. It is also important to test the logic, audit the code and deploy the project on the main network.

How to launch a DeFi company?

Starting a DeFi company begins with developing a business model, forming a team (developers, product managers, marketers), selecting a blockchain ecosystem, and building a protocol architecture. It is also important to consider legal aspects, prepare tokenomics, and conduct a marketing campaign before launch.

How much does it cost to develop a DeFi application?

The cost of developing a DeFi application varies from $30,000 to $250,000+ depending on the complexity, number of features, chosen network, and security requirements. The amount includes design, smart contracts, frontend, audit, and integration with Web3 infrastructure.

Is DeFi mining profitable?

DeFi mining (more commonly referred to as liquidity mining or farming) has the potential to be profitable, particularly in the early stages of protocols. However, returns are dependent on token volatility, market competition, and risks of loss (impermanent loss, hacks, TVL declines), so it is important to analyze the terms of participation carefully.