8 May, 2020
Decentralized finance has exploded into a sector with a steady growth of assets value locked in smart contracts. New types of DeFi projects are proliferating while DeFi lending, DeFi payments, and decentralized exchanges remain as the most profitable industry segments.
DeFi Pulse. Crypto research firm Messari has revealed that DeFi lending is the top-performing category in terms of ROI, followed by decentralized exchanges and DeFi payments.
We monitor trackers like DeFi Pulse and Alethio to stay informed of changes in the metric for DeFi adoption in lending, decentralized exchange, and payments platforms. It gives us valuable insights to compare their key figures and allows us to select some of the consistently high-return projects.
We have put up a brief of their functional overviews in this article for you. Below you’ll find precious intel on some of the leading projects in the Ethereum DeFi Economy.
Decentralized finance, aka DeFi and Open Finance, is recreating virtually every financial service including:
DeFi operationalizes these services without any middleman or centralized banking. The number of DeFi projects has nearly doubled In 2019 as the global blockchain developer community made fast progress inbuilding new products and establishing new services.
“We live in the era of Open Banking. This brave new world where customer data can be shared with almost any competitor heralds a long-term trend of better products, better prices and better value for your money.”
– Valeria Gallo, FinTech expert in Deloitte’s EMEA Centre for Regulatory Strategy (ECRS)
Today, DeFi solutions are being built upon all major blockchains. Ethereum, however, leads the DeFi economy sector for now. Most of the protocols and decentralized apps (DApps) that run on the Ethereum blockchain have found a solid market fit and established large user communities.
Decentralized lending and borrowing platforms are some of the most remarkable developments on the DeFi landscape. DeFi lending & borrowing platforms let users supply and lock their funds into smart contracts from where other users can borrow and pay interest on them. Each loan is collateralized by crypto.
Multiple protocols are offering best possible interest rates to boost up the market. This rate dashboard will keep you informed of the changes in interest rate percentage.
We present our top five DeFi lending & borrowing platforms for obtaining instant loans.
Compound has established itself as one of the dominant money market projects over the past year. It aims at building an open-source and decentralized protocol enabling users to earn interest on Ethereum digital assets by lending them for acquiring real-world assets like real estate, vehicles, or commodities. Backed by renowned venture capitalists like Andreessen Horowitz, Coinbase Ventures, and Bain Capital Ventures, Compound has raised $8.2M in seed funding and $25M in round A, which has become one of the largest venture capital investments in a DeFi startup.
Here’s how Compound works, in a nutshell:
Each asset gets tokenized through cTokens and has its own market with interest rate based on the supply and demand. cTokens also let the user move and trade locked assets through various Apps.
Aave’s open-source protocol uses a pool strategy, adjusting the interest rates algorithmically. This means the more aTokens the lender holds, the higher the interest fee will be.
The ecosystem has its aTokens for paying interest and LEND tokens granting voting rights for decisions related to the protocol parameters and smart contract upgrades. Back in 2017, Aave’s ICO campaign raised $600K ETH in exchange for $1B of LEND tokens.
Aave’s decentralized crypto lending marketplace, ‘ETHLend’ is often compared to centralized loan platforms, like SALT. ETHLend vs SALT is actually a battle of crypto vs fiat collateral. SALT offers fiat-backed loans, which is considered an advantage by those who are used to a more traditional financial system. On the other end, ETHLend offers advantages like no middlemen, independence from banking regulations, and freedom to borrow crypto-backed loans from anywhere in the world.
Number of Users: 4,300+
Total Value Locked: $50M+
Token Type: ETH, WBTC, DAI, USDC, REP, ZRX, TUSD, BUSD, and MANA
Interest Type: Floating
The goal of dYdX is to introduce margin trading, options, and derivatives to the blockchain space, which are normally found in fiat markets and common for traditional investments. Core features of the platform include:
Recently, dYdX launched Perpetual Contract Markets using BTC/USDC stablecoin offering up to 10x leverage. Perpetual contracts are like futures contracts, minus the expiry date.
Each loan on the platform is collateralized with 125% of its value and self-liquidates if this ratio falls below 115%. This ensures lenders will always be repaid. dYdX is often referred to as a very-low-risk DeFi protocol which has no native token and charges trading fees.
One of dYdX’s major investors is Coinbase and its USDC Bootstrap Fund that invested $1M into the project to further increase the platform’s liquidity.
Along with offering borrowing and lending tools, dYdX also allows its users to place bets on the future prices of popular crypto and directly connect to the platform with their digital wallet.
Number of Users: 8,600+
Total Value Locked: $30M+
Token Type: ETH, DAI, and USDC
Interest Type: Floating
Nuo is referred to as a DeFi debt marketplace with no native token and adjusting the interest rates algorithmically. The platform has earned $14.5M in total value locked with its all-time high hitting of $20M in July 2019.
Since launching on the Ethereum mainnet in January 2019, Nuo has added assets and features, including mobile compatibility and meta transactions to access the network without having to pay any transaction fees.
Total Value Locked: $2.3M+
Token Type: ETH, DAI, SAI, KNC, ZRX, MKR, REP, BAT, WBTC, USDC, LINK, and TUSD
Interest Type: Floating
Dharma is a user-friendly layer atop the Compound protocol. It introduces new and non-technical users to crypto transactions and allows them to easily borrow or lend in the DeFi markets and earn interest on stablecoins. You can start simply using a debit card. Funds are held in a non-custodial wallet, which continuously earns interest on all of your deposited assets.
Dharma’s value to the DeFi lending experience consists in:
Dharma develops its “core” and “underwriting” contracts in-house. The underwriting contracts are open-sourced and non-custodial, while each loan-contract is closed-sourced. This means that the receiving address contains a contract interacting with a script located on a centralized Dharma server.
Total Value Locked: $1.3M+
Token Type: DAI or USDC
Interest Type: Floating
Decentralized exchanges, or DEX for short, enable trustless peer-to-peer trading, directly connecting cryptocurrency or token buyers and sellers across a global liquidity pool. DEX execute trades through smart contracts that ensure transaction security and allow users to trade simply by connecting with their wallets.
Dune Analytics reports that over $2B has already been traded on Ethereum DEX since the beginning of 2020 while total trading volumes have increased by 62%.
Be sure to check few of these advanced and consistent decentralized exchange platforms before starting off with decentralized finance technologies.
Uniswap is one of the most exciting developments of 2019 in the DeFi space. Built entirely on-chain, Uniswap is a decentralized protocol for automated liquidity provision, without off-chain dependencies.
Uniswap doesn’t have its own native token. However, each liquidity pair on its protocol can work as a unique and transferable token.
Number of Users: 54,300+
Total Value Locked: $45M+
0x is a decentralized exchange protocol that facilitates the low-friction exchange of ERC20 and ERC721 tokens. Trades are executed by smart contracts that any DApp can hook into as the protocol is open-source and completely accessible to its users.
0x managed to raise $24M in ETH in less than 24 hours during its token sale back in August 2017. Goal of this project was to drive standardization through a global liquidity pool.
Following are the core strengths of 0x protocol:
The protocol also acts as a liquidity aggregator for DApps incorporating exchange functionality. Furthermore, 0x enables these DApps to create their own liquidity pools to charge transaction fees on the resulting volume, while swapping tokens.
0x pulls exchange features from the app layer into the protocol layer and enables easy connection with its API. To top it off, it allows traders to include any kind of asset in a transaction, be it gold, digital asset, or fiat money.
Number of Users: 3,300+
Total Value Locked: $26M+
Kyber is another on-chain liquidity protocol offering multiple types of reserves in the form of smart contracts controlled by anyone who deployed it. While Uniswap limits users to supply to the same pool and sets prices using a formula, Kyber offers liquidity spread across various reserve pools. Traders can get the best price from any pool that offers it across all reserves.
“Kyber is the biggest liquidity provider in the Ethereum DeFi space. Allowing developers to build financial products permissionlessly is one of its many strengths. Kyber is the cornerstone of DeFi.”
– Simon Kim, CEO at Hashed, Seoul and Silicon Valley based blockchain consulting company
KNC token is Kyber’s native coin awarded to stakeholders for taking part in protocol governance and is available to use on Skrill.
Number of Users: 64,000+
Total Value Locked: $5M+
The rationale behind DeFi payment solutions is to create an open finance ecosystem to facilitate institutions and the underbanked & unbanked populations. DeFi payments offer secure transactions which are powered by programmable smart contracts.
Let’s move onto a few examples.
OmiseGO is a white-label eWallet and a DeFi payments platform working worldwide across different asset classes and financial apps.
OmiseGO was among the best ICOs of 2017 raising $25M seed capital before being launched publicly. The team behind OmiseGo is targeting financial use cases to enable this protocol to become a decentralized bank and payment system for global finance.
24 Hour Volume: $119M+
Market Cap: $107M+
Request Network is a payment-based DApp and an open network for transaction requests. It operates REQ coin as the platform’s core token which is compliant with the ERC20 standard.
Requesting and receiving payments via Request Network is quite simple and takes only three steps:
The request payment model is perfect for both businesses and individuals, enabling a secure and quick authentication for invoices, taxes, and other types of payments.
24 Hour Volume: $108K+
Market Cap: $9,6M+
In early February, Celer Network announced its open source Lyra Mainnet, enabling “highly optimized and production-grade” software creation. And recently, on May 8th, Celer team kicked off its new Orion mainnet upgrade, enabling everyone to run a node on Ethereum at the cost of just $5/month.
24 Hour Volume: $1,7M+
Market Cap: $9,3M+
Alongwith using Ethereum, a myriad of projects use Bitcoin, Tron, EOS, and other major blockchains to convert conventional finance models into DeFi alternatives. We at PixelPlex are well equipped to capitalize on the opportunities offered by the wide proliferation of DeFi. Our own DeFi protocol ‘Echo’ has been built and scaled to contribute to the ever growing decentralized economy. Echo is loaded with industry-standard feature such as:
Our objective at PixelPlex is to take DeFi to a new level by enabling interoperability of the two networks within an innovative ecosystem while offering convenience and freedom to transact.
DeFi offers promising investment avenues to all investors. This is evident from the swift recovery of DeFi capitalization to over $1,6B (DeFiMarketCap) within two months after the price collapse of “Black Thursday” on March 12 and Bitcoin’s 3rd halving on May 11. The ability to stabilize market volatility in extremely uncertain conditions is one of the most beneficial aspects of investing in DeFi.
The DeFi economy isn’t perfect yet, but the initiatives taken to create non-overcollateralized loans and improve debt-collection techniques are already in development.
In 2020, we expect DeFi to gain further traction, as blockchain development is growing in popularity, attracting talented technology specialists and developers to contribute.
At PixelPlex, we track the development of decentralized finance economy in real time. So stay tuned and expect more from us on DeFi in future.