How To Build a DeFi Project in 2022?

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Decentralized everything is getting a huge word of mouth these days. Decentralized finance, in particular, holds great promise and attracts the eyes and investments of forward-looking business owners.Today, 214 of 238 DeFi projects in the world run on the Ethereum Ecosystem. At the same time, the total value locked in DeFi protocols has reached over $82 billion with all-time-high global blockchain spending. So if you’re looking to join this craze, there has never been a better time to build a DeFi solution.

Today, we’ll go over the milestones of DeFi development, including the step-by-step process of building a bespoke DeFi product.

What is DeFi development?

Let’s start with the basics. DeFi is an independent financial ecosystem that allows participants to interact with each other directly, thus eliminating the need for intermediaries. Thanks to intermediary-free operations, transactions can be executed faster and cheaper.

DeFi protocols are considered one of the most reliable and secure because they are based on blockchain and smart contract technologies. A smart contract, in turn, is a computer algorithm that accurately executes a given agreement between two or more parties to a transaction. This process is fully automated and gives the parties a guarantee that the information recorded in the code is secure, encrypted, and cannot be used by third parties for their purposes.

The DeFi ecosystem covers the entire sector of financial transactions and services, including:

  • lending;
  • investment;
  • settlement transactions;
  • trading, and others.

The main agenda of decentralized finance is to challenge the traditional banking sector and replace existing financial products with decentralized, open-source protocols. The latter will make the financial landscape more accessible, convenient, and user-centered.

Since DeFi products rest on a wide range of other technologies such as smart contracts, its development is a complex and consistent process. You also need to factor in important aspects, including security audits for smart contracts and the front-end of your DeFi solution.

Building blocks of decentralized finance

Blockchain

Decentralized databases serve as a settlement layer for decentralized finance products. The blockchain layer acts as an anchor for a complete ecosystem, establishing indisputable security as well as objective finality. Today, the majority of DeFi solutions stand on Ethereum due to its wide array of tools and smart contract-friendly foundation.

Tokens

Tokens are digital units of value that can be traded or exchanged within a blockchain platform. Bitcoin is a vivid example of token pioneers that are still widely used. Just like DeFi solutions, tokens are based on smart contracts.

Wallets

A cryptocurrency wallet is a secure digital wallet that makes it possible to receive, send and store cryptocurrency. Also, it stores the private keys that allow you to access and manage your crypto funds. There are cryptocurrency wallets that work with only one cryptocurrency. Multi-currency cryptocurrency wallets allow you to own different cryptocurrencies.

Smart contracts

Smart contracts, which are the backend of DeFi, are sets of functions and data stored in a blockchain. They store code that is executed automatically when specific agreements are met. Smart contracts authorize different tasks that range from selling tokens to managing decentralized organizations.

Decentralized applications or dApps

dApps allow crypto enthusiasts to access DeFi products, thus offering traditional user interfaces. They run on a blockchain network of computers and rely on smart contracts instead of the usual backend. This is in stark contrast to traditional apps which run on centralized servers.

As you can see by now, the DeFi ecosystem is diverse. However, you don’t need to build each of these components from scratch. Let’s see what you need to build a DeFi product.

DeFi development: Step by step

From a technical perspective, the development process of DeFi is similar to other tech projects. Thus, the roadmap includes a comprehensive workflow from discovery to deployment. Let’s unravel the main stages.

Strategy development

This stage is one of the most important because it determines the success of the entire project. At this stage, the goals and objectives of the project are formed and the scope of the decentralized software is set. The development team performs thorough business analysis and matches the insights with relevant technical solutions. Here, your tech partner will also determine the time and cost of software development.

UX/UI design

Design thinking comes up short when it comes to blockchain-based solutions. Most user interfaces are made by developers, thus failing to deliver user-friendly solutions for easier accessibility. Therefore, the DeFi projects development process should also include the proven expertise of UX/UI designers to make your product convenient for the general public.

Smart contract protocol development

These are the cornerstone for decentralized solutions since they amplify the backend of your application. These are self-executing programs with the terms and conditions being directly embedded into the code. Smart contracts are executed by a network of computers, rather than by people. This eliminates the need for a third party to mediate or enforce the contract. However, the code must be thoroughly audited for vulnerabilities since smart contracts cannot be changed once they’re deployed on the mainnet.

Front-end development

This is the stage when your UX/UI layouts are brought to life and integrated into the DeFi solution. Although the UX of blockchain-based solutions is uncharted territory, front-end tech stacks are similar to traditional applications. Therefore, a winning combination of Vue, React, or Angular can complement the user-friendly exterior of your decentralized project.

Testing

Now it’s time for your team to test the solution. This final stage is utterly important for the security of your project since it is hard to change the code once your solution is up and running on the platform. Your team should prioritize vulnerability checks in addition to regular tests, as these are major DeFi trouble points.

The bottom line

Cryptocurrencies have taken the world by storm, with Bitcoin and Ethereum ruling the roost. But this is just the beginning — the true potential of blockchain technology lies in decentralized financial applications (DeFi), which will enable anyone to borrow, lend, or trade cryptocurrencies and tokens without the need for a third party.

There are many reasons to build a decentralized finance project in 2022. Perhaps the most important reason is that the DeFi ecosystem is projected to grow its dominance in the coming years. The infrastructure needed to support mainstream adoption will be in place, and users will have a wide range of products and services to choose from.

In addition, the community of developers and entrepreneurs working on DeFi projects will be growing exponentially, providing valuable resources for those looking to get started. Finally, the regulatory landscape for DeFi projects is getting more clear as global governments are recognizing the potential of DeFi.

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