In the crypto space, DeFi projects have been fueled by the recent bull runs with a parabolic increase in value and popularity. These projects currently have a value of $6 billion in assets, and it’s growing week by week. According to the DeFi tracking website DeFiPrime, there are now over 100 projects tackling various DeFi solutions. So, what exactly is DeFi, and why is it so revolutionary? In short, DeFi is a decentralized finance movement to bring financial services to the mass market by leveraging Ethereum’s interoperability and smart contracts. The following DeFi projects lead the pack and grab the attention of leading investors, product developers, and cryptocurrency stakeholders.
Maker is a decentralized credit platform. The smart contracts on its protocol are worth over $600 million. The platform supports it’s stablecoin DAI. Its value pegged to the US Dollar, DAI is one of the most well-known stablecoins. The DAI stablecoin can perform all the tasks expected from a currency, such as lending and borrowing, making payments, investments, and so on. However, unlike other dollar-pegged stablecoins, DAI is not dependent on the banking system for its dollar holdings. They use Ethereum smart contracts. Over 400 apps and services have currently integrated Dai, including wallets, DeFi platforms, games, and more.
Uniswap is one of the best DeFi projects out there, and it took a big slice from the current DeFi bull run. Uniswap launched in November of 2018 and was recently replaced by Uniswap Version 2 on May 18. Uniswap founder Hayden Adams described Uniswap Version 1 as a “proof-of-concept” with Uniswap Version 2 being a significant improvement. It’s a fully decentralized exchange, but it differs from other decentralized exchanges as it leverages incentivized liquidity pools instead of order books. Users who decide to provide liquidity are rewarded with a small percent of the fees incurred on each transaction. Uniswap has over $100 million locked in liquidity pools and hundreds of new project listings per week. For novice cryptocurrency users, there is a learning curve to using Uniswap as it functions off external ERC-20 wallets connected and used to trade assets and provide liquidity.
Compound operates as a decentralized lending protocol built on the Ethereum blockchain. Users can borrow or lend from a pool of assets. Investors can earn interest on their holdings, short assets they believe are overvalued, and obtain assets they need without purchasing them. The process of contributing to a Compound liquidity pool is simple, allowing anyone to immediately begin earning compounding interest with automatically adjusted rates based on supply and demand. Compound currently has $790 million assets locked, grown from just $100 million on June 1, 2020. Compound’s native token is COMP; it functions as a governance token that allows holders to participate in protocol governance. Investors who possess at least 1% of COMP tokens in circulation can submit governance proposals.
Synthetix operates as a decentralized asset protocol on the Ethereum blockchain. Synthetix allows its users to create Synths. These Synths are synthetic assets that mimic the price of a real-world asset. Using Synths DeFi tokens, users can place their bet on traded assets outside the DeFi crypto environment. These assets can be stocks, commodities, indexes, and fiat currency or forex. The success of Sythetix’s decentralized finance tokens pulled $140.6 million in trading volume.
Yearn Finance, one of the most exciting projects, exploded to markets in July this year with their native token, YFI. We experienced mind-blowing growth thanks to a limited supply based around exclusivity initially reserved for liquidity providers. This DeFi has been launched by Andre Cronje back in February 2020; he claims YFI has the most equitable token distribution since Bitcoin launch. There was no pre-mine at all, and the entire supply was up for grabs during the YFI liquidity mining initiative. For its fair distribution, alignment of governance and financial incentives with a token, and use of a community-owned multisig, yEarn finance is the top DeFi project based on decentralization.
Curve launched in early 2020, and it allows users to trade between stablecoins, their low fee algorithm explicitly designed for stablecoins. Curve is one of the early proponents of yield farming and currently offers seven liquidity pools where users can stake stablecoins to earn rewards, such as new cryptocurrencies. Curve is one of the most popular DeFi projects out there with their easy to use user interface.
DeFi’s big brands are starting to implement some form of decentralization. Obstacles are sure to arise soon, but mitigating them will help separate the wheat from the chaff. By creating an environment with decentralization in finance where no one controls the market, we can successfully change how finance is conducted.