DeFi Development

What DeFi Is

Decentralized finance (DeFi) began to gain real traction after the global market crash in March 2020, yet its true essence still remains unclear to many. At first, the term simply described decentralized versions of traditional financial instruments. Today, however, DeFi has matured into a vast ecosystem of decentralized applications (dApps) and financial services built on public blockchains.

The mission of DeFi is to create an open, permissionless financial system that anyone can access — without relying on banks, brokers, or other intermediaries. Instead, transactions are managed by smart contracts, which execute automatically once predefined conditions are met. This model not only reduces costs and delays but also ensures transparency, since every operation is recorded on the blockchain.

Unlike centralized finance (CeFi), where control and custody lie with institutions, DeFi hands control directly to users. You hold your private keys, you decide how to invest, borrow, or trade. Critics often view this self-custody as risky, but in practice, it empowers individuals to take full responsibility for their assets while benefiting from open, borderless access to financial tools.

From decentralized lending platforms and liquidity pools to stablecoins, insurance protocols, and yield farming strategies, DeFi continues to reshape what financial participation looks like in the Web3 era. For businesses and investors alike, it represents not just an alternative to traditional finance, but a blueprint for the future of global financial infrastructure.

The difference between DeFi and FinTech

Decentralized finance may look similar to financial technology (FinTech), as both aim to modernize financial services. However, the key difference is that while FinTech relies on traditional financial infrastructure, DeFi builds an entirely new foundation.

Take TransferWise (now Wise), for example — a fintech service for international payments. Although its fees are significantly lower than those of most banks, it still depends on bank accounts and legacy infrastructure that many consider outdated. By maintaining accounts in multiple countries, Wise simplifies cross-border transfers: when you send euros abroad, the service collects your funds locally and pays out from its own account in the recipient’s country. This reduces fees and speeds up settlement, but ultimately, the system still hinges on centralized intermediaries.

Now compare this to a DeFi service such as Dai transfers. Instead of banks or fintech companies, Dai transactions are verified by Ethereum stakers. Your transfer — equal in value to one US dollar — is confirmed in around 15 seconds, the time it takes to generate a block that records verified transactions. On top of that, you can send Dai to anyone with an ERC-20 compatible wallet. The recipient receives funds in just seconds — even if they live in a sanctioned country or within an outdated financial system.

Where DeFi is Used

Decentralized finance is an accessible alternative to most traditional financial services, allowing anyone who has an internet connection and some awareness of cryptocurrencies to interact with the DeFi ecosystem. For that, developers have created a hundred new blockchain projects with their own protocols, distributed networks, decentralized services, and dApps.

When we take on DeFi, we start with the terms of reference for the project development. Without detailed ToR, we won’t be able to evaluate and start creating your future DeFi project.

Stablecoins

One of the first real-world use cases for decentralized finance was stablecoin projects. Stablecoins are cryptocurrencies pegged to the value of a reference financial instrument, most commonly fiat currencies like the US dollar or commodities like gold. Each issued unit of a stablecoin is backed by a reserve stored with a trusted custodian. For example, USD-pegged stablecoins maintain their value through reserves managed by the issuer, and their purchase or sale usually requires compliance with AML/KYC procedures.

Examples of DeFi stablecoin projects include Liquity USD (LUSD), USDD, and Wrapped Bitcoin (WBTC). While WBTC is pegged to Bitcoin, it actually operates on the Ethereum blockchain, making Bitcoin liquidity accessible within Ethereum-based dApps.

Stablecoins are the backbone of DeFi — they provide stability in a volatile market, enable lending and borrowing, and act as a bridge between traditional finance and blockchain ecosystems.

Decentralized Autonomous Organizations (DAOs)

Another widely adopted DeFi concept is the decentralized autonomous organization (DAO). Among the most prominent examples is MakerDAO, which runs on Ethereum. MakerDAO has its own stablecoin, DAI, but participants can also issue custom stablecoins. The mechanism is similar to the historical issuance of fiat money backed by gold — except here, the collateral is ETH or other approved ERC-20 tokens. This process, called collateralized debt positions (CDPs), ensures that issued tokens are backed by digital assets.

Today, launching a DAO is more accessible than ever. Platforms like DAOHaus, based on the open-source Moloch framework, allow startups and communities to create DAOs without reinventing the wheel. DAOs reduce coordination costs to almost zero, enabling decentralized governance and collective decision-making for projects ranging from investment funds to gaming guilds.

Decentralized Exchanges (DEXs)

With the rise of DeFi, decentralized exchanges (DEXs) have surged in popularity again. Unlike centralized exchanges, DEXs don’t hold user funds or personal data on their servers. Instead, they operate through blockchain-based smart contracts, simply matching buy and sell orders. This model removes the need for KYC, reduces custodial risk, and offers users full control of their assets.

Examples of innovative DEXs include:

• Uniswap — both a DEX and an Ethereum-based liquidity protocol that uses automated market making (AMM) to enable seamless token swaps.

• 1inch.exchange — a DEX aggregator that splits orders across multiple non-custodial exchanges, minimizing slippage and finding the most favorable execution price.

DEXs have become a cornerstone of DeFi, fueling the liquidity layer on which other protocols depend.

Prediction markets

Another niche but growing DeFi sector is P2P prediction markets. These platforms let users place bets on the outcomes of various events: elections, sports results, price movements, and more. The concept is similar to traditional betting but powered by blockchain, ensuring transparency, fairness, and global accessibility.

Well-known platforms include:

• Augur — an Ethereum-based oracle and prediction market that leverages the “wisdom of the crowd” to forecast real-world outcomes.

• Gnosis — a comprehensive platform featuring:

  • Conditional Tokens — a framework for event-based tokens;

  • Protocol — a DEX optimized for liquidity;

  • Safe — a secure digital asset wallet;

  • GnosisDAO — a governance DAO managing prediction markets and platform updates.

Prediction markets represent the experimental frontier of DeFi, showing how decentralized systems can crowdsource knowledge and incentivize accurate forecasting.

DeFi services

Apart from stablecoins, DAOs, DEXs, and prediction markets, there are 6 other fields of decentralized finance:

1. P2P lending.
2. Decentralized insurance.
3. Issuance of synthetic assets.
4. DeFi asset storage and management.
5. Liquidity pools.
6. Marketplaces.

As worthy examples of decentralized finance in the form of services successfully operating in these fields, we would like to highlight the following:

What the Advantages of DeFi Development Are

In 2019, Initial Exchange Offerings (IEOs) grabbed the spotlight. Today, the same level of attention surrounds DeFi projects — and for good reason. Decentralized finance has grown into one of the most dynamic segments of the crypto industry, providing real benefits both for end users and for businesses launching new solutions. Let’s break down the key advantages.

True decentralization

The cornerstone of DeFi is trustless decentralization. Rules are hard-coded into smart contracts, which automatically execute transactions once conditions are met. After launch, a DeFi project doesn’t require centralized management — governance is distributed among a network of participants. This not only removes the risk of manipulation by the development team but also creates resilience against censorship and external control.

Public accessibility

DeFi opens the doors of the global economy to people who have traditionally been excluded from it. According to the World Bank, around 1.5 billion people worldwide remain unbanked, often because they lack proper documentation or a credit history. With DeFi, these barriers disappear. Anyone with an internet connection and a crypto wallet can access services like lending, savings, or yield farming — without paperwork or intermediaries. For residents of developing countries, this represents a genuine financial breakthrough.

Transparency

Traditional financial systems are often opaque, with hidden fees, complex contracts, and limited access to data. By contrast, DeFi protocols are fully transparent. All transactions are recorded on the blockchain and available for verification at any time. White papers and protocol documentation clearly outline terms for borrowing, lending, staking, and more. This makes it easier for users to evaluate projects and select the most reliable platforms without leaving their homes.

Full control over assets

On DeFi platforms, you are your own bank. Users retain custody of their assets at all times, signing transactions with their private keys and deciding when and how funds are used. No government regulator, bank, or centralized exchange can freeze accounts or seize funds. This self-custody model not only provides independence but also builds resilience in the face of market shocks and regulatory uncertainty.

What Benefits DeFi Developers Offer to Businesses

Any financial institutions, fintech companies, or crypto projects can connect to decentralized finance to benefit their business. For example, we suggest you get:

• A potential source of yield from unused fiat or cryptocurrency reserves
• Easy access to capital through lending protocols to fund business operations
• Reduction of costs and elimination of intermediaries due to the use of blockchain technology
• Automation of processes and reduction of errors due to the implementation of reliable smart contracts
• Attractiveness for potential investors due to the diversification of their investments through cryptocurrencies.

Cost of services

If you need a unique DeFi solution, we are ready to create it. Polygant develops DeFi apps of any complexity. Contact us to discuss all the details, and we will start working on your project right away.