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Blog|Defi|What Are and How to Buy DeFi Coins In 2022?
Published February 10, 2022|7 min read

What Are and How to Buy DeFi Coins In 2022?

Many people looking for new and promising investment opportunities wonder, What are DeFi coins? These are virtual coins issued by representatives of the decentralized finance industry, namely, developers of decentralized exchanges. You can buy and use them in several ways, and you will find more details on this hot topic below.

What Are DeFi Coins and Tokens?

A DeFi coin is a full-fledged cryptocurrency. What is DeFi crypto? It is used as digital money, giving the possibility to purchase goods and services as well as make other payments between users. It necessarily has a blockchain at the core.

What is a DeFi token? A token is a kind of digital asset. It can also play the role of virtual money since it has an established value, but its main purpose is to provide certain rights or services. Tokens do not have their own blockchain, and their use is based on the functionality of other platforms. If a DeFi coin is a cryptocurrency, an analog of digital money provided for real money, the tokens are purchased as access to certain services.

How Does DeFi Work?

The main task of decentralized finance is to become an alternative to the banking sector and replace the traditional technologies of the current financial system with open-source protocols. DeFi offers financial instruments in the form of services and applications created on the blockchain. It opens access to decentralized lending and new investment platforms for many people. Thanks to DeFi, crypto fund owners are able to receive passive income from their assets while saving on fees for transfers, loans, and deposits. A person who wants to lend money in exchange for interest sends tokens to a special smart contract, which returns the interest in the native currency of the platform.

Types of DeFi Tokens

Most of the existing DeFi tokens are built on the Ethereum blockchain. Decentralized finance became a trend in 2019, and so far, its popularity continues to gain momentum, and the number of new applications in the field is steadily growing. They can be divided into several groups, and the main ones are presented below.

Security tokens work like securities. Utility tokens give access to services provided by a project. Another category worth highlighting is called real cryptocurrencies or payment tokens – this type of token has its own blockchain and is often considered a means of payment.

It is important to remember that one application has only one control token and several operational tokens. An application can run without a control token, which can be released months or years after the launch.

Reasons to Choose DeFi Tokens

The first and main reason for the popularity of DeFi is the absence of regulators. Decentralized finance and the subsequent use of these tokens ensure personal privacy.

The second reason is the surge in attention from major players and traditional financial institutions. DeFi tokens are the most interesting in terms of possible breakthroughs, and you will read about where to buy DeFi coins below.

Where to Buy DeFi Crypto?

There are three most reliable and popular ways. The first one is centralized exchanges; the second is decentralized platforms, and the third is digital wallets that support cryptocurrency. Generally, it is almost impossible to buy virtual money before listing at crypto exchanges. It is also worth considering another option for earning money. It happens that a token initially appears on a little-known exchange, and when it enters a larger marketplace, its value increases several times.

Exchanges

Binance was founded by Changpeng Zhao in 2017. It is the world's largest cryptocurrency exchange by trading volume, with over 100 cryptocurrencies regularly traded. Huobi is a cryptocurrency exchange established in 2013. As of this writing, it is ranked #2 on Coinmarketcap's list of the top cryptocurrency exchanges. In addition, the exchange offers various additional services, and it is quite easy to explore its platform. Gate.io is an advanced crypto exchange that supports trading in over 1,000 cryptocurrency pairs. It was founded in 2013 by Lin Han as Bter.com, but it was rebranded to Gate.io in 2017. It is one of the largest crypto exchanges in the world in terms of the trading volume. How to buy DeFi crypto? Each platform has its own instructions, rules, and tips.

How to Buy DeFi Coins?

Before you start buying currency, you need the following:

  • a crypto address called "public key", which is a string of unique numbers that allows you to receive crypto (similar to a bank account number);
  • a crypto wallet serving as a safe place to store your coins (similar to a bank account);
  • a crypto exchange, which is a website for converting fiat money into coins (similar to an exchange office);
  • a preferred payment method (a debit or credit card to buy coins);
  • an identification document (your passport or driver's license).
  • Registration

    The registration process depends on the platform you choose, so you should find the corresponding guide on how to buy DeFi coins there. In general, you may need to provide a phone number, email, ID, and so on.

    Deposit

    Before using the functions of the wallet/exchange, you need to load the balance of your personal account. So, select a currency and click "Deposit".

    Buying

    When the money is credited to the account, you can start buying. If you decide to go the way of trading on an exchange, you need to create a buy order. As soon as the transaction is completed, the necessary coins will be credited to your exchange account.

    How to Track Your DeFi Tokens and Coins?

    You can track your funds directly in your account, for instance, in the wallet tab. But besides this, special services are now actively developing, including analytical tools for decentralized finance, where all data about your funds is collected.

    What Are the Benefits of Buying DeFi Crypto?

    The list of positives includes the following:

  • You can enjoy easy access to financial services.
  • Rules for carrying out business operations are written in a smart contract. Once it's up and running, a DeFi app can work on its own with little or no human intervention.
  • DeFi provides equal control for all participants.
  • Transactions are carried out quickly and without a chain of intermediaries.
  • The source code of applications is open for review.
  • New services can be created by combining other products.
  • Absence of control and complex forms to be filled out.
  • Now that you know the answer to the question “What is a DeFi token?” and have a basic understanding of its advantages, let’s see how to avail of it.

    Where to Use the Crypto?

    The main task of digital money (Bitcoin, altcoins, tokens) is to anonymously and quickly transfer funds to any country with a minimum commission. Today, you can pay for renting a hotel room, studying at a university, and even buying an airplane with the help of cryptocurrency. The popularity of blockchain games is also growing rapidly, as is the usage of crypto payments for online entertainment. Crypto technologies are constantly evolving, offering more opportunities for their use.

    How Risky Investment Is It?

    There is always an investment risk as market performance changes. But you can minimize it by using reliable platforms and investing an amount that is not critical for your financial health. Here are the most common risks you should keep in mind along with the answer to the question, What are DeFi coins?

    Fluctuations in Value

    There are two key drivers of growth in the value of DeFi tokens. The first of them is entering a new exchange, and another is the development of a new product. Along with this comes the main risk - volatility. The rate of DeFi tokens can fluctuate by hundreds of percent per day. For the most part, this concerns projects that have not yet been added to large marketplaces and are currently traded only on small decentralized exchanges.

    Non-Payment of Loans

    A person can lend their crypto assets to those who want to borrow digital money with the aim to earn interest on the loan. The loan amount is limited by two factors – the platform liquidity and the amount of collateral. The loan limit directly depends on the amount of cryptocurrency blocked by the protocol. In times of high volatility, DeFi users will have to pay higher fees to meet their obligations in a timely manner.

    Conclusion

    After you have learned how to buy DeFi coins, it is worth analyzing the type of token and weighing all the details before making investment decisions. It is always important to remember that the price of a token is based on the law of demand and fair value. The crucial thing is the understanding of the base and the current value of the token, as well as its potential price if all goals are met.

    Frequently Asked Questions

    What Is a DeFi Token and Coin?

    Coins are cryptocurrencies existing only in electronic or digital form and working on their own blockchain. They are stored in digital wallets and used for payments, money transfers, and savings. Tokens are digital assets generated on the basis of already existing blockchains and used within a certain infrastructure.

    Where to Buy DeFi Crypto?

    You can buy units of cryptocurrencies using centralized exchanges, decentralized marketplaces, virtual wallets, or other financial platforms.

    How to Buy DeFi Coins?

    Buying on an exchange is the safest and most profitable way in terms of exchange rates and commissions for depositing and withdrawing funds. Before you start trading, you will have to verify your identity by going through several verification steps. Then, you need to create an order to buy a selected currency and wait for its execution.