Decentralized finance (DeFi) is one of the hottest trends emerging in the crypto markets. DeFi refers to financial services built on a blockchain, primarily on the Ethereum network, allowing anyone to access financial products and services online in a decentralized and borderless manner.
Today,Fi users can borrow, lend, trade, invest and make payments without needing a financial institution as an intermediary. Instead, the role of financial institutions is being replaced by decentralized smart contract protocols.
Today, the total value of DeFi recorded has more than doubled to over $42 billion since January of this year.
Top applications DeFi
In this guide, we list the top twelve Ethereum- and DeFi-compatible protocols, ranked by the dollar amount involved in each platform’s smart contracts.
To compile our list of the best DeFi apps, we used links to data from analytics provider DeFi Pulse.
Maker is the most popular DeFi application on the market today. The platform has more than $7 billion in tokens locked into smart contracts with production protocols.
MakerDAO is a decentralized lending app on the Ethereum blockchain that supports Dai (DAI), a stable currency pegged to the US dollar. You can use Maker to open a vault, lock a collateral such as ETH, and create an IAD as a debt against that collateral.
DAI is the only stable currency that can be used without restrictions. Unlike his stablemates, he doesn’t have a dollar in the bank. Instead, Maker Protocol relies on smart contracts and ETHs with guarantees to keep prices stable.
In addition, IAD holders can lock their IADs into the manufacturer’s Dai savings contract (DSR) and earn a variable percentage of the Dai through a stability fee.
Compound is a decentralized money market protocol based on the Ethereum blockchain that allows owners of digital assets to borrow and lend cryptocurrencies against collateral. You can place assets in the compounding liquidity pool and start earning compound interest immediately. Interest rates are automatically adjusted to supply and demand.
In the total payment, ten percent of the interest paid is set aside as a reserve, while the rest goes to the liquidity providers. Protocol’s liquidity pools have locked up over $6 billion, making it one of the most popular DeFi platforms.
Aave is a decentralized liquidity market protocol without limit in which you can participate as a lender or borrower. Lenders provide liquidity to the market to generate passive income, while borrowers can benefit from a credit surplus and deficit.
Aave offers unsecured and unguaranteed loans, where the loan and repayment must occur in the same transaction. The protocol’s native control token is LEND, but it can support 16 digital assets (13 of which can be pledged).
Ave currently has over $5 billion locked up in his smart contract.
Uniswap is a decentralized exchange protocol that allows users to trade between ETH and ERC20 tokens in a chain or earn a commission by offering any amount of liquidity. The conversion of ERC20 tokens is done through a simple user interface, in a private, secure and non-popular way.
Uniswap allows users to create marketplaces (i.e. liquidity pools) that help improve the liquidity of record exchanges. Each money pair is identified by a unique and freely transferable ERC20 token.
Uniswap’s liquidity pools currently contain $4 billion worth of Ethereum tokens.
SushiSwap is a decentralized application that aims to foster a network of users by providing a platform where users can buy and sell digital assets. It is essentially a copy and paste of Uniswap, with some modifications to the Uniswap open source code.
The platform allows you to create a liquidity pool for your own token, offer ETH and an ERC20 of your choice, and exchange one token for another.
With over $4 billion in its exchange pools, SushiSwap has become the leading DeFi platform for exchanging digital assets without intermediaries.
Curve Finance is a decentralized Ethereum-based liquidity pool for efficient exchange trading. The protocol allows low interest trading for stable currencies such as USDT, DAI and USDC.
Tokens held in liquidity pools are also transferred to the composite protocol and generate income for the liquidity providers. There are currently seven curvepools, including Compound, PAX, BUSD, Y, REN, sUSD and sBTC, which support trading for a range of digital stables and assets.
Curve Finance’s liquidity pools currently contain $4 billion in digital assets.
Synthetix is a decentralized, Ethereum-based investment platform that allows users to produce and trade so-called synths, which are synthetic versions of physical assets tokenized on a blockchain.
Synthetix, originally known as Havven, allows users to invest ETH in synthetic assets that can represent dollars, gold, bitcoin, stocks and more. Trading on a non-traditional platform is done on a peer-to-peer basis.
Synthetix has its own token called SNX. Users can lock in collateral such as SNX and ETH for Mint Synths. Syntheses are essentially freely tradable ERC20 tokens.
Synthetix currently has approximately $2 billion in its liquidity reserves.
Balancer is another decentralized exchange (DEX) that allows you to buy tokens at the best possible prices and trade them directly. Unlike other DEXs where liquidity pools contain only two assets, balancing pools can contain up to eight digital assets for increased liquidity.
Users can deposit money and earn money from the pool’s trading commissions. You can also exchange tokens via the DEX.
As mentioned above, these are the different models of equilibrium pools. Private pools are designed for private purposes and may not rely on external providers of liquidity. The design of the pool is solely determined by its creator and is therefore subject to change.
Shared or public pools, on the other hand, are open to all interested parties, but are permanent and cannot be changed in their configuration.
Digital assets worth $1.7 billion are currently held in Balancer’s liquidity pools.
Bancor is a decentralized exchange protocol (DEX) that allows users to trade digital assets rather than through a central exchange.
The Ethereum-based app uses smart contracts that allow for the exchange of digital tokens, which are not full-fledged commodities. The bank plans to create liquidity for digital assets using so-called smart tokens.
Bancor has its own token, the Bancor Network Token (BNT), which serves as a hub for smart tokens and connects other digital tokens in the Bancor ecosystem.
More than $1.5 billion in crypto assets are currently locked in the banking protocol.
Badger DAO is a decentralized, self-sustaining organization that aims to build infrastructure and products to bring bitcoin into the DeFi. This means that users will be able to use bitcoin in DeFi for tokens, borrowing, liquidity, elasticity, etc.
For example, users will deposit different types of tokenized bitcoins, such as WBTC, renBTC, and tBTC, into Badgers Sett Vault to automatically generate revenue. Setts automatically invests your tokens based on revenue-generating strategies that maximize returns and reduce costs.
The proprietary cryptocurrency that powers the Badger DAO is DIGG. At the time of writing, more than $1.3 billion in assets are locked up in Badger’s smart contract.
InstaDapp is a robust smart wallet for decentralized finance. The application allows users to manage, optimize and deploy their assets and maximize their profits across multiple protocols.
For those new to the DeFi space, InstaDapp has a user-friendly interface that allows users to manage their DeFi investments through protocols such as Maker, Uniswap, and Compound.
InstaDapp currently has over $1 billion registered in smart contracts.
Alpha Homora is a culture protocol on the Ethereum blockchain. This allows the lenders to earn interest on the ETH and generate income from the harvest.
However, unlike other farms, Alpha Homorra allows users to take leveraged positions to increase their trade commission income as cash providers and (potentially) increase the profitability of their farms.
Alpha Gomor has more than $900 million in assets in the chain.
DeFi’s rapid market growth is a testament to the financial innovation emerging in the blockchain industry. If DeFi’s current rate of growth continues, we will see decentralized, borderless and open financial solutions replace many of the functions that centralized financial institutions offer today.
The information contained herein is for informational and educational purposes only and should not be construed as financial or investment advice. Investing in ICOs, IEOs, cryptocurrencies or tokens is highly speculative and the market is largely unregulated. Anyone considering doing this should be prepared to lose their entire investment.
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