What you should know about DeFi Apps

What is DeFi App Development? 

First, it’s important to understand what DeFi is. DeFi stands for “decentralized finance”, a new approach to finance that uses Blockchain and cryptocurrency technologies to create decentralized financial applications and services that are available to everyone and not controlled by centralized organizations. With DeFi, users can borrow, lend, earn interest on their deposits, and exchange cryptocurrencies and tokens with each other without the need for intermediaries and centralized exchanges. DeFi has also opened up new opportunities for microfinancing, lending, and other financial services that can be accessible to anyone, regardless of their location or status.

How does a DeFi App work?

Before we dive into the workings of a DeFi app development, let’s start with the basics. You already know what DeFi is, but it’s worth noting that without the “Blockchain” technology, DeFi would not be possible.

The Blockchain is a secure and reliable method of storing information in digital form. Instead of storing data in a single location, it is distributed among several computers in the network that collaborate to verify and safeguard the information. Each block of data contains information about modifications made to previous blocks, enabling the creation of a chain of blocks — hence the name “Blockchain”. This technology is widely used in various domains, such as finance, healthcare, and voting, where information security and authenticity are crucial.

DeFi applications operate on the Blockchain, inheriting the security and transparency benefits of this technology. By using smart contracts to automate financial transactions, centralized control becomes unnecessary. This opens the door to greater financial inclusion, offering previously unavailable services to a wider audience, while ensuring security and confidentiality.

Take microcredit as an example. Without DeFi, traditional banks and financial institutions may not offer microloans due to high processing costs. DeFi and Blockchain technology make it possible to create decentralized platforms where people can provide each other with microloans, without intermediaries and with minimal fees.

Platforms like these can use smart contracts to secure and automate the loan issuance process, while Blockchain technology ensures transparency and openness to all participants. As a result, even those without credit history or with low income can access financial services and improve their lives, which is the core concept behind the DeFi industry.

Types of DeFi Applications

It’s important to note that DeFi is not a singular type of application. Often, DeFi combines multiple finance-related applications. In other words, a single DeFi app may encompass both microloans and P2P cryptocurrency exchange, you should take it into consideration before starting the DeFi app development. 

Decentralized Exchanges

A decentralized exchange, or DEX, allows investors to buy, exchange, and sell cryptocurrencies without the need for intermediaries such as brokers, clearinghouses, or other centralized authorities. This provides greater transparency and control over transactions, as well as the ability to trade at any time that is convenient. In addition, DEXs typically feature statistical data and charts that show the rise or fall of specific cryptocurrencies, as well as information on the liquidity of credit transactions. One of the most successful DEXs is Uniswap, which is built on the Ethereum network.

NFT DeFi Apps

NFTs are unique digital assets recorded on the Blockchain, often on the Ethereum platform. Each NFT has a distinct code, ensuring that it cannot be replaced or forged. This allows for the creation and trade of one-of-a-kind digital items such as art, video games, music, and other previously unownable and untradeable digital content. NFTs have surged in popularity, with some selling for millions of dollars, providing digital content creators with new revenue streams. The leading NFT marketplace, OpenSea, boasts over 2.3 million users and a market cap of over $800 million.

Crypto Wallets

A crypto wallet is an application that enables users to store, send, and receive cryptocurrencies. These wallets work based on cryptographic keys, which consist of two parts: a public key for receiving cryptocurrency, and a private key for sending it.

When you send cryptocurrency, you input the recipient’s address, which is the public key of their crypto wallet. You then sign this transaction with your private key to authorize the operation. The transaction is sent to the Blockchain network for verification and confirmation.

Exodus is a popular wallet that offers the ability to exchange fiat currency, such as dollars, for cryptocurrency, and also store NFTs within the wallet.

DeFi Banking

DeFi banking is a new approach to banking that is based on blockchain and cryptocurrency. In DeFi banking, users interact directly with each other through decentralized applications, using crypto wallets to store their funds.

DeFi banking offers a wide range of financial services, including lending, borrowing, storage, and cryptocurrency exchange. There are many more services available, but we have listed only the most popular ones. Users can access these services without having to go through the identification and credit scoring procedures required by traditional banks. DeFi banking provides greater transparency, lower fees, and accessibility for all, making it more democratic and accessible to a wider audience.

In addition to the main directions of the DeFi industry, we also recommend exploring P2P lending and crowdfunding platforms. There are over a hundred DeFi services available, so you’re sure to find a niche that suits your preferences.

Should you develop your own DeFi App?

DeFi industry experts are confident that the industry will experience rapid growth in the next 2-3 years. DeFi banking, P2P lending, and decentralized exchanges are all very promising directions in the DeFi industry that will require mobile applications. If you’re considering building your own DeFi app, you need to factor in the cost of development and the features it should include.

Before starting the DeFi App Development process, there are four critical criteria to consider: transparency, reliability, compatibility with other systems, and flexibility. You’ll also need to integrate a range of features to ensure your app delivers a seamless user experience.
Key Features of DeFi Apps

Cryptocurrency Compatibility

Imagine if your application only supported transactions with Ethereum. This would significantly reduce your potential audience and revenue. It is much more profitable to create a multi-currency system so that as many people as possible can use your service.

Search and Filter Functions

By simplifying the interaction between clients and your application, you can build long-term relationships with them. If your application takes care of users and creates a comfortable experience, they are less likely to switch to a competitor. Therefore, it’s important to include search and filter functions, enabling users to quickly find what they need.

Transactions with cryptocurrencies

Not only decentralized exchanges and wallets, but also other types of DeFi applications should support operations with financial assets. Make it possible to transfer money between accounts, exchange and conversion, as well as buy and sell cryptocurrencies.

Push notifications

Every smartphone application has push notifications. They are useful because you can quickly convey important information to people: changes in rules or updates. People don’t need to open the application to get valuable information – it’s convenient and useful.

Compatibility with iOS and Android

Returning to the narrowing of the target audience – it’s not worth limiting yourself to only iOS-based smartphones or only Android-based smartphones. Make the application for both operating systems at once, so you can reach as many people as possible and thereby increase your revenue. You can create one application that will work on both operating systems, it’s called React Native.

How to create your own DeFi application?

Before starting the DeFi App Development process, you need to decide which type of device you will be creating an application for: desktop, mobile, or web version. The recommended technology for creating the application will depend on the chosen device.

Developers can use Electron.js to create cross-platform desktop applications that are native. Electron.js is an open-source framework that employs programming languages such as JavaScript, HTML, and CSS, as well as Chromium and Node.js frameworks, and is compatible with Windows, Mac, and Linux. 

For web app development, React.js and Node.js are popular libraries. React.js is an open-source frontend library that facilitates user interface creation, while Node.js is used to develop scalable and flexible backend environments with high performance. 

React Native is a framework suitable for both Android and iOS that uses a single codebase for mobile app development. 

To create a DeFi app, it’s necessary to write smart contracts on the backend, and Solidity, Java, JavaScript, Python, and SQL are among the recommended programming languages. Skilled coders are required for Blockchain development due to its particular nature.

DeFi App Development risks

When creating an application, you should anticipate encountering some challenges, which is common for every development team. To help you prepare, we’ve gathered a list of the most frequent issues that arise during the development process.

The product’s tokenomics. Developing a successful cryptocurrency project requires careful consideration of the product’s tokenomics. This involves making important decisions such as choosing the Blockchain platform and determining how to use crypto, which will drive further choices regarding the tech stack, protocols, and more. Tokenomics refers to the factors that impact the use and value of the token, including creation and distribution, supply and demand, incentive mechanisms, and token burning. Having a well-designed tokenomics strategy is crucial to the success of any crypto project.

Lack of standardization. In the DeFi industry, lack of standardization can pose a challenge for developers when creating applications. With a variety of protocols, Blockchains, and DeFi app options available, users expect a product that can support them. However, the industry is young, and standards are few. This makes it difficult to create an application that meets user needs. Developers must pay attention to their team’s specialization and ability to build applications that support all protocols.

APIs and data sources. Integration with various APIs and data sources is another challenge when developing an application. Information from different sources needs to be gathered and uploaded to the system, which may require writing custom software or integrating with other systems and databases. It’s crucial to allocate extra time and financial resources to ensure a smooth integration process.

Performance requirements. Meeting performance demands is essential for financial applications, as users expect quick processing of transactions when buying and selling their assets. Insufficient servers or low-bandwidth infrastructure can lead to customer loss. Therefore, it’s crucial to ensure that your DeFi app can handle high traffic and operates smoothly under heavy loads.

Various approaches towards governance. Each DeFi protocol has its own governance model, which may not be suitable for your needs. Governance approaches in the DeFi space vary widely depending on the project. Some projects involve all participants equally in the decision-making process, while others limit it only to token holders or stakers. For instance, the native token of the Terra network, LUNA, has been used to submit and vote on governance proposals, but its recent sharp drop in value has caused a sensation in the community.

5 Tips for Building a Successful DeFi Application

At the beginning of Bitcoin’s history and the cryptocurrency industry in general, many people regarded it as a financial pyramid scheme, and the industry was met with skepticism. However, by 2023, we can see that every other person is talking about cryptocurrency. The crypto industry has gained people’s trust, making it an opportune time to explore 5 tips for building a successful business in the DeFi industry.

№ 1: Define the app’s concept. Consider the type of DeFi app you want to develop, such as a DEX, lending, or NFT application. Assess your target audience: how they interact with their crypto assets, and the project’s business objectives. It’s important to evaluate the uniqueness and relevance of the idea, establish achievable deadlines, and create a budget estimate. 

№ 2: Design your application. Creating a user-friendly interface is crucial for any application, including DeFi. Provide references to the design team to ensure that the application looks and feels great. Collaborate with the UI/UX team to design your DeFi app. Since DeFi can be complex to comprehend, having an intuitive design can help users navigate the app with ease. You may consider offering onboarding tutorials during the first launch to help users get started.

№ 3: DeFi App Development. Once you have a solid plan and design, it’s time to build your DeFi application with the help of your team. Choose the appropriate Blockchain and token economics for your project. If you’re building a complex exchange-type application, consider integrating cryptocurrency wallets. It’s important to entrust the development of complex stages, including smart contract writing, to experienced specialists.

№ 4: Test the app. Quality assurance and testing should be carried out in parallel with app development to ensure the app works as intended and with zero bugs. It’s important to test the DeFi app on different devices and under high load to ensure it meets user needs and performs well.

№ 5: Release the app and gather feedback. The final step is to launch the DeFi app and collect feedback from users to improve the quality of service. Ask users to rate the app based on different criteria and use this feedback to make regular updates to the application to enhance the user experience and ensure maximum efficiency.

Now is the best time to start developing in this direction. While the financial market is recovering, you have time to create a truly high-quality and in-demand product.