By now it’s safe to say that most people know what cryptocurrencies are, or at least they have heard of bitcoin. Growing interest from some of the world’s most recognizable institutions has helped to increase bitcoin's popularity.
More recently, NFTs have increased in notoriety and even many celebrities have started to promote them, further centering the mainstream press on the cryptocurrency and blockchain space. However, in addition to bitcoin’s recent all-time high achievements and the growing fascination with NFTs, perhaps the most important development in the space, decentralized finance (DeFi), is also really taking off.
For people who pay very close attention to what is happening in the world of cryptocurrencies and blockchain technology, DeFi has quickly become one of the most, if not the most exciting area of focus within the space.
Here is a list of 10 DeFi Projects that could impact the future of finance:
Aave is an open-source liquidity protocol for earning interest on cryptocurrency deposits and borrowing assets. Aave is one of the leaders in the DeFi space and is non-custodial, meaning that Aave doesn’t have any control over the private keys or cryptocurrencies of its users. Basically, the company doesn’t directly interact with the crypto assets of its users.
Users participate as either depositors or borrowers. Depositors provide liquidity to earn passive income, while borrowers are able to choose between borrowing in an overcollateralized or undercollateralized way. The Aave token gives token holders the ability to vote on Aave improvement protocols and users who stake the Aave token can earn staking rewards and fees from the protocol.
Aave was one of the biggest projects during the DeFi craze during the summer of 2020. Aave allows users to borrow and lend with more than 20 different cryptocurrencies, ultimately providing more choice to users than many of its competitors in the space and making it one of the top DeFi projects.
Compound is an autonomous interest rate protocol that allows users to earn interest on and borrow cryptocurrencies. It currently allows users to earn interest on and borrow 13 different cryptocurrencies. Compound allows anyone who deposits supported Ethereum tokens to earn interest on their tokens or take out a secured loan.
Holders of Compound’s native token, COMP, can propose changes to the Compound protocol and vote whether to adapt changes from other token holders without the Compound team being involved. This sets it apart from other similar protocols. Users can earn Compound tokens by depositing cryptocurrency or taking out a loan, or they can buy them from a number of exchanges. Compound is one of Aave’s biggest competitors.
Yearn.finance uses automation to help users maximize their profits from yield farming. Yield farming is the practice of earning rewards and interest on cryptocurrencies by searching across lending marketplaces for the best interest rates and deals. Yield farming is a complex process, but yearn.finance uses automation to simplify the process of yield farming for those who are not as tech-savvy, allowing them to benefit from the process of yield farming without any of the stress involved and technical knowledge that is usually required. Yearn.finance set out to make decentralized finance and the process of yield farming easier for the average investor.
Chainlink is a decentralized oracle service. Blockchains can not access data that exists outside of their network, so oracles are used as data feeds. Chainlink allows DeFi investors to gain access to data from outside. The access to real-world data enables investors to have access to the data they need to complete financial transactions. Chainlink’s decentralized oracle network provides inputs and outputs for smart contracts on any blockchain.
By providing access to real-world data, Chainlink improves the capability of smart contracts.
Uniswap has quickly become a leader in decentralized finance. Uniswap is a trustless and decentralized financial infrastructure that enables swapping tokens and supplying liquidity through liquidity pools. The company also has a strong governance structure, enabling community ownership of the protocol through ownership of Uniswap’s token, UNI. Uniswap was primarily built as a decentralized exchange on the Ethereum blockchain for swapping ERC-20 tokens.
To provide a sense of Uniswap's quick ascension to becoming a DeFi leader, you have to look at the numbers. At the time of writing, Uniswap’s all-time volume was $196 billion+. The community includes 72K+ liquidity providers, 39 million+ all-time trades, and 200+ DeFi integrations. Also, the UNI token has quickly become one of the most popular tokens on a number of exchanges. Uniswap’s governance system and dedicated community have positioned it to continue to grow and become more influential in the years to come.
Serum is a Decentralized Exchange (DEX) and ecosystem. It is known for providing low transaction costs and unparalleled speed. Transaction speed and costs are two primary issues facing decentralized finance, and by solving these issues, Serum has set itself apart and will ultimately help further the goals of decentralized finance and help DeFi. Its quick transaction speed and low costs can help DeFi achieve mass adoption.
Serum runs on top of the Solana blockchain and is permissionless, meaning that you do not need permission in order to
join the communityuse the DEXand benefit from the ecosystem.
Polkadot is a multi-chain platform. It is based on a whitepaper written by Gavin Wood, who was previously Co-Founder and CTO of Ethereum. Polkadot allows for the transfer of data between connected blockchains (known as parachains). Polkadot makes it possible to use data from private, restricted networks on public blockchains.
Polkadot is a smart contract platform, however, many developers are using it to develop DeFi projects and build DeFi tools because it is fast and enables scalability, two areas where Ethereum could use improvement. Polkadot’s primary goal is to enable a completely decentralized web where users are in full control.
MakerDAO is a Decentralized Autonomous Organization (DAO), and one of the most recognized DeFi projects. This is primarily due to its connection to DAI, a stablecoin whose value is pegged to the U.S. dollar which is one of the most popular stablecoins in the cryptocurrency industry.
DAI is a currency that can be used by anyone at any time. Maker allows you to lock your DAI on its platform and earn the DAI savings rate that was set by the Maker community. The Maker protocol, otherwise known as the smart contracts that power the DAI currency, is governed by token holders of Maker’s governance token, MKR. Maker is a cryptocurrency ecosystem, and over 400 apps and services have integrated with the DAI stablecoin. This includes wallets, DeFi projects and platforms, blockchain games etc.
Orion Protocol’s mission is to solve some of the biggest issues in DeFi by unifying the crypto market. This DeFi project is building the first gateway to the whole crypto market. The goal is to “aggregate every CEX, DEX, and swap pool into one decentralized platform”, creating a connection between the different DeFi products in the space.
The spread-out nature of the cryptocurrency market as it is has left a divide between DeFi and traditional finance. By creating one point of entry where the entire digital asset market can be accessed in one place, this protocol could theoretically be used to create a bridge between crypto, traditional finance, and real-world assets.
Synthetix is a liquidity protocol that describes itself as the “backbone for derivatives trading in DeFi”. With more than $2 billion of assets locked in the protocol, Synthetix is quickly becoming a leading DeFi project. Synthetix enables trading and staking on its platform.
Individual token holders have power in the governance structure of Synthetix by holding the SNX token. The SNX token will give token holders the power to vote out elected DAO members and override the decisions of elected members in some instances.
The DeFi projects listed in this article are just some of the many projects that are poised to impact the future of the finance industry. It is becoming clear as the DeFi space continues to grow and offer more innovative solutions to the problems with centralized finance that the future of finance will be decentralized.
Also published on: https://vegaxholdings.medium.com/defi-projects-9851de8f31b4