As cryptocurrencies become more mainstream, the idea of De-Fi is growing, with several financial apps performing financial services without the use of intermediaries via blockchain technology. Decentralized Finance works by creating an unbiased money market, operating through conditions defined in small pieces of code called smart contracts.
While interest in De-Fi surged to new heights in 2020, the second wave of enthusiasm is gaining traction in 2021. Data on DeFi Pulse shows that from January to December of 2020, the DeFi sector showed unparalleled growth with its total value locked or TVL increasing from USD$690 million to USD$14 billion. Following this 14X growth, the first half of 2021 has already witnessed a 6X growth of DeFi’s TVL reaching a staggering USD$88 Billion in May.
With many new projects, capabilities coming out, DeFi is looking to change the world for the better, which is why we take a look at some of the top 10 De-Fi protocols to look out for today.
Mercurial Finance is a platform that acts as a liquidity management protocol for the Solana Blockchain ecosystem by providing support for stable and pegged assets. Due to high fees and the lack of a reputed system, DeFi’s growth has not been able to reach its true potential. These shortcomings are a result of the limited capabilities of existing Blockchain platforms. Solana, a relatively new Blockchain platform, has emerged as a better alternative for the DeFi space. Solana offers unparalleled scalability of transactions at a significantly lower cost.
Stone DeFi project aims to simplify the process of getting yield in the De-Fi world. It is the only yield management framework focused on creating Rock Solid Yield for all the users in the DeFi space, through Cross-Chain assets and liquid staking. Stone aims to create the most antifragile platform to meet the needs of the DeFi industry.
With the inclusion of yield-bearing assets introduced by Stone, it will further create yield-based derivatives such as ‘Risk Optimized’ Yield indices and other derivatives, making DeFi easy, secured, and accessible for everyone.
Running on the Ethereum blockchain, Aave is a decentralized money market that allows its users to deposit, borrow, and earn interest in crypto assets without involving intermediaries.
Since its non-custodial, a particular institution doesn’t manage a user’s assets and therefore has no direct control over the private keys of its users. Instead, users put their faith in the pre-written immutable code that dictates the terms and conditions.
Borrowers must put up collateral more in value to the amount they wish to borrow. To earn passive income, depositors offer liquidity for the protocol and are given Aave tokens in return. In terms of utility, these Aave coins enable users to earn staking rewards and participate in the platform’s governance, making it truly decentralized.
Oracles are the foundation of De-Fi applications, and Chainlink is one of the most trusted decentralized oracle services. Since the beginning of 2020, it has managed to increase by 50X.
Blockchains require Oracles to supply data outside of their network because Blockchains themselves are unable to access it. De-Fi investors need real-world data to complete financial transactions. Chainlink promises to bridge the gap between blockchain-based smart contracts and real-world applications.
Simply said, the missing piece of the puzzle required a seamless transfer of value by providing real-time data such as the cost of a volatile cryptocurrency.
Built on Ethereum, Compound is an autonomous interest rate protocol that allows users to earn interest and borrow cryptocurrency assets against collateral.
Like putting money in a savings account, users send their crypto to the Compound wallet to earn interest. The interest earned is denominated in the same token as users lent their assets.
While it resembles any other decentralized lending protocol, the use of cTokens (Compound’s native token), allows users to earn interest while also using this interest to transfer and trade in other applications.
With over $2.5 billion of assets locked in its protocol and termed as the backbone of derivatives trading, Synthetix is one of the most popular and fast-growing De-Fi projects.
In essence, Synthetix works on an Ethereum-based protocol for the issuance of synthetic assets. Technically speaking, synthetic assets are the financial instruments in the form of ERC-20 smart contracts that manage to track and provide returns on other assets without the need to hold those assets. Synthetix aims to expose a diverse range of crypto and non-crypto assets to its consumers in a decentralized manner while participating in the DeFi ecosystem.
Built on Ethereum, Uniswap has quickly become the leader in decentralized finance. Uniswap works as a decentralized financial infrastructure that enables its users to swap tokens and supply liquidity through liquidity pools in exchange for rewards.
Having already built a proven product, along with the popularity of the UNI token, Uniswap’s influence in the upcoming years will be guided by its community-led growth, governance system, and sustainability.
Built on Binance Smart Chain, PancakeSwap is more than just another food-themed DeFi protocol. It allows its users to swap between different cryptocurrency assets by tapping into user-generated liquidity pools.
It compensates users who stake with its own coin, CAKE. Its capacity to enable cheaper and faster transactions is another critical quality that distinguishes it as one of the best initiatives. Furthermore, the PancakeSwap lottery mechanics make the trading experience more gamified
The De-Fi sector lacked a simple and effective savings product that appealed to crypto natives and enthusiasts for long. That is until Anchor stepped in.
Anchor is a savings protocol built on Terra blockchain that offers a principle-protected stable coin savings product by paying a stable interest rate. Anchor makes this possible by leading out to borrowers who get block rewards from major PoS blockchains.
Users’ principle remains safe, as they earn a consistent interest rate, and they don’t have to lock up their assets. In a sense, Anchor acts as a bridge between the De-Fi and the traditional world
SushiSwap is an exchange where users can buy and sell various crypto assets. Smart contracts govern the tokens that are traded on this platform. Liquidity providers who contribute to the SushiSwap liquidity pool are rewarded with protocol fees as well as a portion of the 100 Sushi tokens that are newly minted. In addition, everyone who owns Sushi can vote on the protocol’s decision.
Decentralized Finance is beginning to unfold its wings and fly to new heights. Apart from these popular De-Fi projects, there are going to be many more protocols emerging in the next round of the said De-Fi revolution.