If you have been following blockchain, you have probably heard of the $4 billion of assets recently poured into an emerging industry called DeFi (decentralized finance). In fact, by the time this article is published, it is safe to assume that DeFi will hit over $5 billion in assets as the industry is growing at over $500 million per week.
So, what exactly is DeFi and why is it important? In short, DeFi is a decentralized movement to bring non-custodial financial services to the mass market by leveraging Ethereum’s interoperability and smart contract capabilities. In layman’s terms, with DeFi the average person could pull their money into a smart contract enabled lending pool and earn interest rates up to 20% and in some cases much more.
Beyond this simple example, DeFi helps democratize financial services and various components within the sector, from how data is collected and managed, to insurance and stable digital currencies. According to DeFi tracking website DeFiPrime, there are currently over 100 projects tackling various DeFi solutions.
The following companies are leading the pack and have garnered the attention of leading investors, product builders, and blockchain stakeholders.
DIA (Decentralized Information Asset) is a Swiss not-for-profit and open-source blockchain project with a mission to drive the adoption of transparent, open-access data and oracles. Within DIA’s DeFi ecosystem, a decentralized community of DIA token holders and their delegates are in control, with DIA’s Governance Token acting as an incentive to key market actors.
DIA is set to become the open-source Bloomberg for crypto and financial data. DIA is currently one of the most anticipated projects in the DeFi space, with an upcoming token sale starting on August 4. The project is backed by notable investors such as Outlier Ventures.
2. Orion Protocol
Orion Protocol (ORN) came to market as the first Dynamic Coin Offering (DYCO) and was one of the most oversubscribed sales in 2020. Orion is building B2B and B2C solutions on the most advanced liquidity aggregator ever developed under the leadership of CEO Alexey Koloskov - a seasoned blockchain developer and the creator of the Waves decentralized exchange.
Since launching, Orion has inked partnerships with Elrond Network, Bitmax, MXC, and Acheron. Since launching on Kucoin and Bitmax, nearly 33% of the initial ORN supply has been contributed to a pre-staking program and the token has stabilized at over a 20x.
Aleph.im is one of the hottest newcomers to the DeFi arena over the last couple of months. Aleph is a chat protocol for machines, where the blockchain runs as nodes for decentralized computing power and storage. In 2020, the public cloud services market is expected to reach around $374 Billion, and by 2022, it is forecast to exceed $520 billion. Currently, Amazon’s AWS leads the market but the demand for decentralized solutions has never been higher.
As a testimony to the success of Aleph.im, their website is actually running on the network right now. Aleph will also be included as one of the partners running the massively hyped project Serum - the world’s first complete decentralized derivatives exchange (featured next).
Fresh off the press, leading crypto derivatives exchange FTX just announced their new DeFi DEX (decentralized exchange) that will be built off of Solana. Under the name Serum, this upcoming DEX will look to capitalize where other DEX’s have failed by providing trustless cross-chain trading, all at the speed and price that customers want.
According to DeFi Rate, “it appears that Serum aims to offer power traders the familiarity and convenience of a centralized exchange like FTX in a completely permissionless and trustless fashion. The architecture is set to favor node operators with incentives to participate in staking thanks to SRM inflation, trading fees, and a delegation/referral system called “leaders”.
Compound was one of the first DeFi companies of this recent DeFi cycle to gain mass attention as their native token, COMP, skyrocketed in value before correcting to current levels. Compound is a money market protocol that lets users earn interest or borrow assets against collateral, all from the Ethereum blockchain.
The process of contributing to a liquidity pool on Compound is relatively simple, allowing anyone to immediately begin earning compounding interest with rates that are automatically adjusted based on supply and demand. Compound currently has $790 million assets locked, up from just $100 million on June 1, 2020.
6. Yearn Finance
One of the more captivating projects, Yearn Finance exploded on to the scene in July as their native token, YFI, experienced mind-blowing growth thanks to a limited supply based around exclusivity initially reserved for liquidity providers (farmers). Yearn acts as a decentralized ecosystem to aggregators that utilize lending services, allowing participants to deposit tokens such as USDC, DAI, and USDT, to participate in Yearn’s selection of the most profitable lending opportunities.
The company is led by developer Andre Cronje, who started the process with democratization in mind. There was no pre-mine, pre-sale, or team allocation, meaning YFI tokens are essentially owned by the community. It will be interesting to see how YFI performs in the upcoming months.
Powered by Synthetix, dHedge is backed by leading investors such as Blocktower Capital and Three Arrows Capital and has built a new protocol for decentralized asset management that looks to democratize trading for everyone. The company recently announced that it will be coming out of stealth mode.
With Synthetix’s zero-slippage trading model and expanding group of listed assets, dHedge is creating new ways to use the liquidity of the derivatives the Synthetix protocol enables. Synthetix currently allows users to mint, hold, and trade a diverse range of derivatives based on assets including cryptocurrencies, fiat currencies, and commodities. Keep an eye out as dHedge launches officially.
Uniswap is one of the driving forces behind the current DeFi bull run. Acting as a fully decentralized exchange, Uniswap differs from other DEX’s as it leverages incentivized liquidity pools instead of order books. Users that decide to provide liquidity are rewarded with a percentage of the fees incurred on each Ethereum powered transaction.
Currently, Uniswap has over $100m locked in liquidity pools and hundreds of new listings per week. For novice cryptocurrency users, there is a learning curve to using Uniswap as it functions off of external ERC-20 wallets that are connected and used to trade assets and provide liquidity. There are also considerations around slippage and volatility that should be studied prior to using Uniswap.
9. Curve Finance
Launched in early 2020, Curve allows users to trade between stablecoins with low slippage, low fee algorithm designed specifically for stablecoins. Curve is one of the early proponents of yield farming and currently offers 7 pools where users can stake stablecoins to earn rewards, such as new currencies. Currently, over $210 million is locked in Curve pools, up from just $15 million on June 1.
With a simple interface, Curve is one of the most popular DeFi platforms and has been praised for its user-friendly features and transparent documentation. The company has been aggressive to support other DeFi projects in recent months.
10. Maker DAO
With over $1 billion in assets committed, Maker DAO is likely the most recognized name on this list and for good reason. The decentralized credit platform supports DAI, a stablecoin whose value is pegged to USD and one of the most used stablecoins in the cryptocurrency industry. Maker DAO allows anyone to open a vault, lock in crypto collateral, and generate DAI against that collateral.
According to Coindesk, Maker's dominance over other projects in the sector stands at 27.1% based on the amount of assets collected.
Disclaimer: Please consult your financial advisor before investing in any cryptocurrencies as they are volatile and pose risks for the average investor. This post is informational in nature and does not constitute financial advice. The writer may have or may hold positions in some of the companies mentioned, either through a personal relationship, as in investor, or user.
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