Blockchain technology is pushing the boundaries of innovation across the spectrum from solving the trust, decentralized finance, programmable money to all the way towards art ownership. Today, we’ll talk about the DeFi and specifically, the top five DeFi projects.
Just in the course of one year, the DeFi market has grown exponentially from less than a billion dollars to almost $60 billion in terms of total value locked (TVL) across the platforms. In our earlier blog, we discussed and understood the concept, ideology, and major use-cases of DeFi. To summarize – DeFi stands for ‘Decentralized Finance’ and refers to a new capital market with a combination of various financial applications that are being developed on top of blockchain technology.
Must Read: What is DeFi?
Now, let’s have a look at the top five DeFi projects sorted by the total value locked in the protocol. The total value locked aKa TVL for a DeFi protocol represents the total number of crypto assets currently being staked in the given protocol. It is the total amount of underlying assets that are being secured by the given DeFi project.
To make things clear, we’ve not included Polygon (Matic) as it’s a scalability solution, not a DeFi protocol.
The word Aave comes from the Finnish language meaning ghost. Aave is currently the biggest DeFi project with over $12 billion in total value locked on the protocol. It is a decentralized money market built on the Ethereum blockchain allowing users to lend and borrow a range of crypto assets.
With the Aave protocol, users can connect their Ethereum/Matic wallet and can deposit, borrow, swap, stake, or participate in governance. It is a decentralized and algorithmic money market meaning users lend money from a pool instead of being matched with an individual. Therefore, the interest rate for loans is subjected to fluctuations depending upon the demand for lending against borrowing.
To participate in the governance of the protocol, users need to hold the platform’s native token AAVE that allows them to vote on Aave Improvement Proposals. Similar to most of the DeFi protocols, one governance token represents one vote.
With over $7 Billion in TVL, Curve Finance ranks second on the DeFi leaderboard. Curve Finance is a decentralized exchange (DEX) designed specifically for swapping stablecoins. It simply allows users to swap stablecoins by connecting an Ethereum wallet such as MetaMask.
Users can also participate in liquidity pools to earn fees by depositing their crypto assets in a pair. Curve Finance also allows users to swap between tokenized versions of Bitcoin such as WBTC, renBTC, and sBTC.
For governance, Curve Finance makes use of its native governance token called CRV which is also continuously distributed to participants of the liquidity pools on the protocol.
MakerDAO is yet another lending and borrowing platform built on top of the Ethereum blockchain. It is made up of a smart contact service allowing users to interact with it to borrow stablecoin DAI against a crypto asset such as Ether.
The organization can be credited with revolutionizing the DeFi space by introducing the world’s first decentralized stablecoin – DAI. It’s a multi-crypto collateralized stablecoin with its value pegged to $1.
The platform also has another native token called MKR acting as a governance token. With DAI, ETH, and MKR, the platform works as an independent & automatic system with each token functioning to counteract the other. Thus ensuring the stability and decentralized nature of the system.
Further Read: What is a DAO?
Compound Finance is another leading DeFi lending platform that also acts as a savings account allowing users to earn interest on their stablecoins. As it’s a DeFi protocol, users can earn interest without having to trust a third party and keeping custody of their funds.
It’s basically an algorithmic money market protocol where users can either deposit their crypto assets to earn interest or borrow other crypto assets against their crypto collateral or both. Similar to other DeFi protocols, the interest rates fluctuate depending upon the demand.
The platform leverages its native token COMP to allow token holders to participate in the governance and vote on the platform’s improvement proposals.
Uniswap is the world’s leading decentralized exchange platform. It’s a full decentralized on-chain protocol built on top of the Ethereum blockchain allowing users to swap ERC-20 tokens and participate in liquidity pools.
Uniswap empowers liquidity providers and traders to participate in a unique open financial marketplace that is accessible to everyone around the world. Being a DeFi protocol, it’s a trustless platform requiring no custodians or middlemen. It has opened doors to millions of unbanked population to trade assets without being subjected to KYC verification.
For governance, the platform allows users to participate and vote using its native token called UNI. The UNI token was introduced last year in September with an airdrop of 400 UNI (currently worth $8800) tokens to each member of the Uniswap community.
While you’re at checking out DeFi protocols, one should also check out some other interesting protocols such as: