What is a DeFi Token?

Grow the Empire

Cryptocurrency sector has expanded significantly over the past few years, and if you are just getting started, you might feel overwhelmed by all the new terms. Now that Bitcoin and Ethereum are well-known cryptocurrencies, more people are turning to DeFi. For the cryptocurrency industry, decentralized finance has opened doors to far too many industries. DEX, DeFi wallets, and DeFi tokens are easily available today.

DeFi tokens are a range of native cryptocurrencies for decentralized, automated platforms that use smart contracts to function. These give users access to various financial applications and services built on the blockchain.

Decentralized finance tokens give cryptocurrency users access to a range of services that resemble those offered by banks, including loans, lending, and insurance. The majority of DeFi tokens are associated with DeFi protocols. These protocols are now largely under the control of the local communities.

Decentralized finance (DeFi) tokens have a market cap of $45 billion, which is a small share of the entire cryptocurrency market. Despite this, it has developed into one of the industry’s fastest-growing segments.

What are some DeFi tokens?

An ecosystem of non-custodial financial protocols, platforms, and services makes up decentralized finance. 

Despite the fact that all DeFi-related projects are grouped together by cryptocurrency market trackers like CoinMarketCap and CoinGecko, they can still be distinguished further based on the governance tokens that some DeFi protocols provide. Empire Token is a prime example of a DeFi token.

 

A DeFi Token: Empire Token

Empire strives to provide solutions through market-driven dApps that cater to the essential needs of DeFi users.

Empire Token is a deflationary currency made to be usable across all Empire Ecosystem applications. To help make this happen, dApps are developed and deployed and the circulation of Empire Token across our entire ecosystem is encouraged. In the most fundamental terms, the deflationary nature of our currency is utilized combined with incentives and the automatic share of dividends to our users, which we call “reflections” as a reward for holding the token to keep our ecosystem healthy. 

Empire also has a native function of our smart contract to provide liquidity for the token. Empire’s tokenomics are designed for maximum resource optimization in different types of market scenarios, as well as to give support to the development and launch of products and services of the Empire Ecosystem to run on different blockchains. 

 

What are governance tokens?

The majority of DeFi tokens are connected to DeFi protocols, some of which are controlled almost entirely by their user base. Users of these kinds of DeFi platforms are required to buy and hold “governance tokens” in order to participate in future decision-making processes. These tokens have unique privileges that let owners vote on platform change proposals. These votes are ostensibly binding on the developer team, and the values they represent are frequently used as stand-ins for trust in the project. 

A decentralized autonomous organization (DAO) is a special kind of collectively managed organization that requires participants to invest their own funds in exchange for voting rights to ensure that everyone acts honestly and the DAO succeeds as one way to accomplish that. Generally speaking, in this system, those who invest more money have more influence over those who do not. Users are then given “governance tokens,” a particular kind of utility token, to signify their ownership stakes in the DAO.

This method of allocating control among stakeholders is referred to as “on-chain governance.” Traditional management roles and the ability to alter the project’s protocol, or the underlying set of computer code, may be included in the range of powers represented by the governance tokens. Users’ votes may occasionally be given a weighting based on how much of the governance token they own. 

Protocols frequently direct a portion of network transaction fees into the wallets of the governance token holders to ensure that they have an interest in the long-term success of the project. The tokens might also have non-governance rights, such as the ability to exchange them for specific other tokens at set prices.

Users who hold more of a particular governance token typically have more voting power than users who hold fewer tokens. This is done on the premise that people who are more willing to invest money in a project are more likely to want it to succeed and will vote for the proposals that will help it do so.

Since Uniswap’s airdrop, numerous other protocols have given away governance tokens to early adopters in an effort to boost voting participation. Additionally, by actively contributing to the protocols, such as by supplying liquidity to their asset pools, users can earn governance tokens. PancakeSwap is one of the most significant governance tokens (CAKE). 

Like the majority of cryptocurrencies, governance tokens are speculative assets. Without participating in governance decisions, you can trade them on centralized or decentralized exchanges, and their prices typically fluctuate like those of other volatile assets. 

Until token holders decide they can be transferred between wallets, some newly issued governance tokens might not be tradable.

 

Where to buy DeFi tokens?

Typically, DeFi tokens are available on decentralized exchanges including Uniswap and PancakeSwap. In the near future, Empire will also launch its native decentralized exchange Goosebumps, which will later be implemented into Empire’s core use case, DeFiGram.io, an all-in-one DeFi application.

It may sound like DeFi tokens are only available for purchase on DeFi protocols, but that is not the case at all. Major DeFi tokens are listed on the majority of centralized cryptocurrency exchanges like Coinbase and Binance. 

You must keep the tokens in a DeFi wallet and link the wallet to the protocol’s governance platform in order to take part in protocol governance. It’s important to note that there are no gas costs associated with taking part in governance.

 

Which DeFi token should I invest in?

A DeFi token index fund might be something to think about if you want to invest in DeFi but are unsure which token to do so. The token keeps track of how the DeFi tokens in its basket are performing. 

But keep in mind that neither the DeFi Pulse Index (DPI) nor specific DeFi tokens will necessarily track the long-term success of DeFi, just as stock market shares can rise and fall independently of a company’s performance.

Another good strategy when investing in DeFi tokens is to DYOR (do your own research). As cryptocurrency is more volatile than stocks, it is recommended to invest in tokens with utility, such as Empire Token, as it drives potential long-term success to the project. Make sure to do your due diligence and study closely the DeFi project before buying its native token.