When last summer we were talking about the DeFi rapid rise, the industry was at the very foot of its real boom. Look at this chart: in summer 2020, the line seems to be somewhat close to zero, even though $4B had already been locked in the industry by then:
Even then some were discussing the ‘DeFi bubble’, but one year since, the market has grown tenfold. What does it say about decentralized finance?
DeFi brought a revolution to global finance. Without centralized entities, it gives access to financial services such as borrowing. lending, earning interest, and asset management. People love DeFi since there are no intermediaries like banks who work slowly and can limit access to your funds at will; it’s more private than fiat CeFi (not totally anonymous but without any personal data); there’s no bureaucracy — no credit checks and you can get what you want in a matter of minutes.
DeFi protocols are Dapps written in smart contracts and running on blockchain platforms, mainly Ethereum. In this article, we will feature the 7 largest DeFi projects by Total Value Locked as of June 2021. These are lending services, decentralized exchanges, assets, and asset management platforms. Here’s how it looks:
See how the market grew — here’s a screenshot taken one year ago:
The list of the top platforms didn’t change much, but the leading projects have grown several times over.
Total value locked: $10.7B
Aave allows you to earn interest on deposits and borrow assets.
If you want to get a passive income, deposit your DAI, ETH, or another Ethereum-based asset. This is how you provide liquidity to Aave, the funds that others will borrow. Your interest rate will depend on the balance of supply and demand. See what your APY (annual percentage yield) can be here.
If you want to borrow a token, you can also do it here — stablecoins, Ether, and other assets are available. Use variable or stable APY. The money is locked in a smart contract that has shown to be reliable in the past years. Overall, Aave is an open-source project, so anyone can audit its code, interact with its user interface and API.
In Aave, flash loans are also available — the type of operations when borrowing and repayment happen as parts of one single transaction. The perk here is that you don’t need collateral to take a loan. Flash loans were hacked many times across 2020, but Aave happens to be secure, not denying the potential risk, though.
Aave token is a governance token: you need it not to access the network’s services, but to have a voting right when the decisions about the future of the protocol are made.
Total value locked: $7.1B
Curve Finance is a DEX that allows trading stablecoins (DAI, USDT, USDC) and wrapped assets (WBTC, WETH) at low fees. Despite its complex interface, Curve has become the second-largest DeFi project: there are plenty of stablecoins in the market, and other tools don’t let swap them as cheap.
Also, Curve allows for making a passive income. The protocol leverages liquidity pools — smart contracts where tokens of a specific pair are locked, e.g. DAI-USDC. The liquidity in this pool is provided by the users, for which they get rewards. Same as Aave, Curve is non-custodial: the money is locked in smart contracts, project’s founders and devs don’t have access to it.
Total value locked: $6.6B
Same as Aave, Maker DAO allows borrowing and lending cryptocurrency without intermediaries. The mechanic is a little different: here, you deposit ETH as collateral and get a loan in DAI, a stablecoin pegged to the US Dollar. You will pay the stability fee (interest) once you come back to repay the loan.
If you want to lend your cryptocurrency to other users, you can also do it, for which you’ll be rewarded with the MKR token. This is also a governance asset that gives you the right to vote on the platform decisions, e.g. when the stability fee is determined.
Total value locked: $6.5B
In Compound, you can deposit such coins as ETH, BAT, and USDC. Your interest will be accrued in the same token. After you deposit funds, you can also borrow money, and the previously deposited assets can serve as collateral.
When you lock your coins in Compound, you get an equivalent in CTokens — also ERC-20 tokens that represent the initial deposit plus accrued interest. At any time, you can return your CTokens to Compound, and get your coins back with the accumulated interest.
COMP tokens are spread among all who deposited in the Compound’s smart contract. Although this is a governance token, it promptly grew in price, and people started using it for trading and speculation. Earning Compound started to be considered as passive income. In DeFi, this is called yield farming.
Total value locked: $5.5B
As you can see, there are a plethora of various projects in DeFi. Newbies may get confused, while experienced users may get tired of switching from platform to platform. InstaDapp combines them all into one app and helps manage all your balances in Aave, Maker, Compound, and Uniswap. Think of InstaDapp as a bank where you can get all services at once: deposit money, exchange and borrow them.
InstaDapp is free. All you need to pay are Ethereum network fees.
Total value locked: $5.5B
Uniswap is perhaps the most popular Ethereum-based decentralized exchange: it allows swapping all assets based on Ethereum. A standard network fee plus the Liquidity Provider fee are paid. Just as Curve, Uniswap leverages liquidity pools: providers lock funds there and get rewarded for that when someone makes an exchange. You can also use Uniswap to add liquidity to a pool and profit.
Governance token UNI is used for making decisions on the protocol’s further updates and treasury usage.
Total value locked: $4.2B
Yearn Finance allows you to optimize the earnings that you get on other DeFi platforms. You can lock funds in the Curve’s liquidity pool via yearn.finance and get some YFI tokens for that. This is another option for yield farming.
Total value locked: $7.9B
A bonus track! We’ve collected the main DeFi projects from the Defipulse portal — however, it mostly features the Ethereum-based platforms. But DeFi is more than that: lately, Binance Smart Chain has also been gaining traction. This is a blockchain launched by Binance, and it’s focused on efficient and lowered fees.
PancakeSwap is a DEX that works on the BSC, helps swap the hundreds of BSC-based assets at fees many times lower than in Ethereum. This DEX works like Uniswap — with its liquidity pools and its governance token CAKE.
When this article was released in the original ChangeNOW blog a year ago, we wrote in it: for DeFi, 2020 seems to be just the beginning, and this turned out to be true. The largest assets grew tenfold, and dozens of the new ones emerged. The opportunities that DeFi gives — no bureaucracy loans, passive income in many ways — have been appreciated by millions of users, and millions are waiting for their turn. Will you be among them?
Of all tokens that we featured, you can buy them all on ChangeNOW. Owning them is not necessary for using the platforms, and for their governance, you sometimes have to have a very big stake — but by some users, DeFi tokens are considered a good investment. We don’t give financial advice and encourage you to do your own research, but whenever you are ready, we’ll be glad to see you swap your tokens on ChangeNOW — in minutes and with no signup. Unlike in DEXes, here, you can trade all DeFi assets for Bitcoin and other non-Ethereum-based assets.
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