In this blog, we have previously covered several important DeFi projects like Uniswap, Aave, and Chainlink. Now, in this post, we will provide a quick overview of some of the other important DeFi projects currently running. While AAVE, LINK, and UNI are some of the most popular and established tokens for investing, you can learn who their competitors are and what makes a DeFi project stand out.
Quick Review: What is DeFi
Decentralized finance (DeFi) refers to an ecosystem of financial service applications that are not monitored by a central authority. In traditional finance, DeFi enables trading, loans, and other financial services but instead uses crypto and digital assets instead of fiat currency. These novel applications run on the decentralized protocols of blockchain applications like Ethereum.
What are Blue-Chip DeFi Tokens
Even though DeFi is a novel movement, there already are projects and tokens that investors consider “blue chip tokens.” In the corporate world, “blue chip” describes financially stable companies that investors believe in even during an economic crisis. In crypto, some apply the blue-chip term to digital currencies with a market cap of $2 billion or more.
- Aave: leading decentralized (DeFi) cryptocurrency lending service. AAVE is the native token of the Aave platform. It is an Ethereum-based ERC-20 token.
- Chainlink: an oracle service delivering data to blockchains. LINK is the native token of Chainlink. The LINK token is an Ethereum-based ERC-20 token.
- Uniswap: a leading decentralized exchange in the Ethereum network. UNI is the native token of Uniswap. The UNI token is an Ethereum-based ERC-20 token.
- Click on the names of these DeFi projects to read more about them and find out where you can invest in them.
What Makes the Best DeFi Projects?
The projects and platforms on this list are tackling the unique challenges that the DeFi ecosystem poses. For instance, they are solving secure user identities for credit rating and ensuring interoperability between platforms. Besides, another challenge is securing management without the need for banks, brokers, and insurance firms. That gives DeFi developers a lot to do as well.
Now, here is our list of 10 best DeFi Projects to follow.
1. MakerDAO (DAO)
Coming in at the top of this DeFi project list is MakerDAO, with a current estimation of 7.4Billion EUR total value locked into its platform as of May 25th, 2021. MakerDAO is a Decentralized Autonomous Organization that has gathered quite the buzz due to its native token DAI, one of the cryptocurrency industry’s most popular stablecoins.
DAI’s value is pegged to the US dollar and can be used by anyone for various services. These include the over 400 apps that have been integrated with the Maker ecosystem. They are the apps such as wallets, projects, platforms, and games.
Holders of DAI will gain a savings rate set by the Maker protocol, decided on by holders of Maker’s governance token MKR.
2. Compound (COMP)
Another important DeFi project is Compound. It is an algorithmic money market protocol on the Ethereum network similar to AAVE.
Compound’s autonomous protocol allows users to provide liquidity in exchange for continuously compounding interest or borrowing against collateral. The network currently supports its services on 13 different cryptocurrencies. In other words, anyone depositing supported Ethereum tokens can begin earning interest on their holdings or take out a loan.
Holders of the native token COMP govern Compound. So these people can make suggestions and propose changes to the protocol and place votes on adaptations without the Compound team present — setting it apart from many other DeFi projects on this list. Lastly, one can earn Compound tokens through the use of the compound service or purchase them from an exchange.
3. Synthetix (SNX)
As one of the DeFi projects with the most value locked in its smart contracts, Synthetix continues to be one of the fastest-growing projects out there.
Synthetix allows users to mint (i.e., create) new crypto assets that synthetically mimic other real-world assets. For example, they can mimic fiat currencies such as Euro and crypto-assets like Ethereum.
Users can collateralize an asset by purchasing native synth tokens and locking them away into a designated smart contract for the asset of their choice. Through oracles, these smart contracts gather data on the asset allowing users to follow fluctuations in the market. The project maintains liquidity through the open market of synths across DEXs (decentralized exchanges) in the DeFi space.
4. REN (REN)
The REN protocol enables decentralized interoperability between blockchains allowing users to transfer various token assets. Unlike Synthetix, REN does not produce synthetic tokens but rather allows the transfer of liquidity from one blockchain to another. This cross-chain value transfer operates autonomously without KYC (know-your-customer forms). It also enables users to initiate as many transfer requests as they wish.
REN easily integrates into a variety of DeFi projects to provide liquidity. Users wishing to earn passive income with their held Bitcoin assets can provide liquidity for borrowers through the REN Virtual Machine.
5. SushiSwap (SUSHI)
Similar to Uniswap, this quickly growing decentralized exchange (DEX) allows users to buy and sell a variety of crypto assets. Token trades are managed by smart contracts to avoid the need for a central authority.
Liquidity is provided by users who stake tokens in staking pools. Unlike Uniswap, however, SushiSwap supports yield farming. This is a passive income method enabling users to stake different assets according to the protocol to yield the most return.
6. Fantom (FTM)
Fantom helps improve the scalability of existing blockchain networks like Ethereum. This project allows all dApps and platforms to run on their own unique blockchain complete with independent governance rules. This enables faster network response across the entirety of the network.
Fantom’s open-source open participation technology works on an aBFT consensus known as the Lanchesis protocol. In this system, nodes do not have to be aware of other nodes when entering the network, which significantly improves scalability.
To sum up, this unique consensus mechanism is vital for the DeFi ecosystem as it enables a variety of DeFi services to execute through smart contracts at lightning speed.
7. Orion (ORN)
A core problem with decentralized finance is figuring out how to get all of the different services and platforms to communicate effectively to make it a more viable replacement for traditional finance. That’s where Orion’s protocol steps in. This service unifies the crypto market since it collects liquidity from multiple exchanges and presents them in one API.
Orion’s platform allows users to manage their portfolios by monitoring activity between exchanges. They can also set alarms, initiate automation for specific asset management, and purchase decentralized applications from the Orion marketplace.
Projects like Orion are exciting because its protocol allows the possibility to bridge crypto and traditional finance into one platform.
8. Litentry (LIT)
Litentry is working to create unique decentralized identities (DIDs) across blockchains that help manage and execute DeFi processes. By providing private and secure DIDs that can be used industry-wide, users can establish credit ratings and avoid the highly collateralized loans currently in place. It also ensures better security when sending end-to-end transactions and improves identity confirmation for dApp services.
The platform is built on Substrate, which makes it compatible with the Polkadot platform. Thus Litentry can be launched as a parachain of its network.
9. Swingby (SWINGBY)
Swingby is another crypto project working on creating cross-chain bridges to move crypto assets between one blockchain and another. Swingby’s warp-speed protocol uses a decentralized proof-of-stake network that allows tokens to move from one chain to another without a central authority.
Projects like Swingby are essential to users wanting to move idle crypto assets to networks because of higher scalability and lower transaction fees.
10. UMA (UMA) — Last but not least of the best DeFi projects
To conclude our list, UMA (Universal Market Access) allows users to create synthetic derivatives of anything that has a price. This is done through trustless contracts on the UMA protocol.
UMA removes the need for traditional middlemen like brokers, exchanges, and clearing houses by allowing parties to make a direct trade through a trustless smart contract. Because the contract is tied to the protocol rules and self-executes, it automatically adjusts each party’s margins and ensuring trades are collateralized.
Unique to UMA is that it is lessening its use of off-chain oracle price feeds to mitigate the oracle manipulation that has occurred in other DeFi protocols.
Best DeFi projects for investors
DeFi offers many exciting opportunities for investors and those interested in earning passive income with cryptocurrencies. Like investing in any other asset, we recommend doing your own research to make financial decisions. To learn about the key things to consider when it comes to investing in DeFi and the risks involved, head to our next blog.
The tokens listed in this article are not listed on Coinmotion — but if you are interested in investing in them, contact our Private banking team.
What DeFi tokens do you want to see listed on Coinmotion? What other DeFi projects should be on this list? Leave your suggestions in the comments.