Decentralized Finance is now one of the most active sectors of blockchain with over $8 billion invested in DeFi smart contracts. It’s a movement that’s transforming old financial products into transparent and trust-less systems. By removing intermediaries, DeFi promises to offer the world a globally inclusive financial system.
DeFi will change the world the same way open course software transformed software products for us. Using decentralized blockchain technology, DeFi replicates, and innovates current financial service models while making them more accessible and flexible.
The financial services comprise digital assets that may not necessarily represent assets in the real world. It also involves smart contracts which replicate derivate products in our conventional financial markets.
Want to delve deeper into DeFi? Here’s our beginner’s guide. <link to the first article>
Up to speed and ready to jump in? There are thousands of DeFi projects with a new global infrastructure for financial activity. From decentralized exchanges to insurance platforms, lending, betting, and much more; the DeFi ecosystem is rapidly flourishing. Not to mention, it is unlocking a financial system with new standards of resilience, access, and transparency.
The Hottest Token of Disruption
DeFi, built on the Ethereum blockchain network, is the next disruption in financial technology which began 11 years ago back with Bitcoin. Decentralized applications (dApps) have taken off in many aspects, the most common being cryptocurrency trading on decentralized exchanges (dexs) like Uniswap, a complete peer-to-peer platform with no company or institution backing it.
Some other Services DeFi Projects allow you to use include:
o Earn interest when you lend cryptocurrencies or borrow them from platforms like Compound or Aave
o Bet on the outcome of world events, economies, or sports using Augur
o Participate in a no-loss lottery on Pool Together where everyone gets their money back, and one weekly lucky winner wins all the interest accrued in a collective pot
o Buy stablecoins — cryptocurrencies pegged to the value of a particular currency or commodity — for instance, DAI and USDC are pegged to the US dollar.
DeFi is also known as Lego Money since you can stack dApps together and maximize your returns. For instance, buy a stablecoin like DAI and lend it on Compound to earn interest. And you can do all this using your smartphone! In the future, you will even be able to buy a home on the DeFi platform with a mortgage agreement where you repay the price over the stipulated period of time.
Before we head to the future, want to know how DeFi is impacting finance in 2020?
Take a look at the top 7 DeFi projects worth your time and investment.
1. Maker
Maker is a permission-less lending program and is often called the first-ever DeFi project. Since its development, it has held the #1 ranking on most DeFi tracking platforms for having the highest total amount of ETH locked in the system.
Maker is also the builder of DAI, the first decentralized stablecoin on Etheruem that offers the world an unbiased currency for financial freedom with no volatility. All you need to get started is some ETH and a Web3-enabled wallet.
2. Compound
Compound Finance is a lending protocol that enables its users to lend and borrow some of the popular cryptocurrencies like DAI, Ether, and Tether.
Audited smart contracts are responsible for the management, storage, and facilitation of the pooled capital. Here, the process for lending assets is simple — enable a supported asset and sign the transaction to approve the amount of capital you want to supply to Compound. The assets get added to the global supply pool, and the interest is tracked in real-time.
Compound has also recently launched a governance token called COMP that allows the community to vote on interest rates and protocol upgrades.
3. Pool Together
As the name suggests, pool together is a no-loss savings game where users can pool their DAI with other players to get the best interest using DeFi’s saving opportunities. The interest earned in the capital pool is collected and distributed as a prize to one lucky winner per week.
For every 1 DAI, the player gets 1 ticket, and the average prize is around $150 currently with the capital pool growing every day. You can get all your savings back with no loss, and there’s no risk of anyone running away with your funds! The smart contracts at Pool Together have undergone a suite of audits that protect your DAI.
4. Augur
Augur is a global no-limit betting platform, enabling transparent and universal access to its markets. It’s community-owned and operated with no single entity that owns the protocol. As a result, users get guaranteed payouts that run on an automated process that no person or organization, including Augur itself, can interfere with.
It also offers a trading app for those who want to access Augur markets and see all their bets in one place. You can bet on anything here and leverage the blockchain-based prediction markets to increase your odds of winning.
5. Uniswap
Uniswap recently gave each owner $2000 — making news in the cryptocurrency world. The project gave UNI 400 to anyone who had used Uniswap before September 2020, and the amount accounted to almost $2000. It is one of the first premier DeFi protocols for automated liquidity provisions on Ethereum. In fact, Uniswap has been the largest decentralized trading venue for long.
Uniswap allows users to trade their tokens without any third-party or middleman using a high degree of censorship-resistance and decentralization.
6. Curve
Curve Finance delivers high-efficiency stablecoin trading with low-risk returns by making use of liquidity pools and bonding curves.
Users who want to swap coins like DAI or USDC in a decentralized format can mitigate slippage on Curve. Approximately $1 Billion assets are locked in Curve, and the fee on pools is 0.004% with no admin fees. This acts as an incentive for crypto traders to use CRV.
Curve is often described as the Uniswap for stablecoins.
7. Aave
Aave is a lending protocol in the DeFi ecosystem that allows its users to lend and borrow multiple cryptocurrencies with a stable or variable interest rate. The unique features of Aave include uncollateralized loans, flash loans, unique collateral types, and rate switching. Flash loans are one of the top-selling points for Aave as they require zero collateral to use. Aave charges a 0.30% fee on flash loans, and the system relies on the timing of the loan’s repayment. When the full loan is repaid within the same block it was issued, it gets approved. In case it is not paid back with the same block, the complete transaction fails.
The native token ‘LEND’ offers its holders a discounted fee and will be soon used as the first line of defense for outstanding loans.
Compared to traditional finance, the DeFi market is undoubtedly tiny. But it’s picking up at an unbelievable pace since 2019. As more projects and dApps enter the market, we’re looking at a future where the traditional financial market is interoperating with blockchain and digital assets in sync.
Bonus:
Here are some of the other top DeFi projects broken down by category for you to explore:
DAOs
- Maker DAO
- Aragon
- Compound DAO
Data and Analytics
- DeFi Pulse
- MakerScan
- LoanScan
Derivatives
- Hegic
- Synthetix
- dYdX
Exchanges and Liquidity
- Kyber
- ForkDelta
- AirSwap
Insurance
- Nexus Mutual
- Etherisc
- Opyn
Investment
- Set
- Allinfra
- Harbor
Lending and Borrowing
- BlockFi
- SALT
- Dharma
