Top Ethereum DeFi Lending, DEX, and Payments Projects
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.
Updated on September 4, 2020
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.
Ethereum Economy Growth
Decentralized finance, aka DeFi and Open Finance, is recreating virtually every financial service including:
- Lending & Borrowing
- Investment & Custodial Services
- Interest Income
- Wealth Management
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.
DeFi Lending and Borrowing
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.
Here’s the list of top DeFi lending & borrowing platforms for obtaining instant loans according to PixelPlex.
yearn.finance is a decentralized finance yield aggregator on Ethereum. Created by Andre Cronje, in February 2020, yearn.finance has swiftly grown into an ecosystem of DeFi protocols. It channels liquidity into DeFi sectors due to which yPools, one of the various Bitcoin pools, have earned some of the best lending rates in 2020. yearn.finance uses decentralized finance projects including Aave, dYdX, and Curve to optimize your token lending. The Total Value Locked (TVL) in yearn.finance has skyrocketed from $7 million to $949 million in just two weeks.
Now, what is YFI? yearn.finance’s native governance token, YFI, is the second biggest DeFi coin in the decentralized finance crypto market as of September 2020, with a market capitalization surpassing $1.1 billion just one and a half months after its launch. Cronje transferred control of YFI stock to a multi-signature wallet, which requires 6 out of 9 participants to agree. As a decentralized finance Ethereum-based protocol, changes to yearn.finance ecosystem are made via on-chain voting.
Here’s how yearn.finance works, in a nutshell:
yearn.finance moves tokens between Compound, Aave, dYdX, and Curve depending on which pool offers the highest yield. Using available on-chain information, the smart contracts automatically move funds to the best current option, guaranteeing optimum returns.
When a user deposits funds in the yPool on Curve, they are converted to yTokens that allows users to earn lending fees plus the trading fees off of Curve. Cronje refers to the yTokens as “APR Oracles that determine the highest APR avenue.” If it is Aave, the yTokens are converted into aTokens that earn interest. Similarly, if the best APR offered is on Compound, the smart contract will return aTokens to Aave and convert the yTokens into Compound cTokens.
A maximum supply limit of 30,000 YFI, a transparent launch, and an active developer has led yearn.finance to become one of the most successful DeFi protocols.
Total YFI Tokens: 30,000
Total Value Locked: $949.1M+
Token Type: DAI, USDC, USDT, TUSD, and sUSD stablecoins
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:
- Investor signs a transaction and approves the funds they’d like to lock using the protocol;
- The asset is instantly added to the global supply pool (the money market);
- Users borrow an asset directly from the protocol by simply specifying the asset they wish to borrow;
- Generated profit gets distributed among the investors with interest being tracked in real time.
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.
- Aave’s Flash Loans. These Loans can be obtained without depositing any collateral and virtually at no cost. Flash Loans rely on loan repayment timing. As long as the loan is borrowed and paid back within the same transaction it was issued, it gets approved. If the loan is not paid back in the same transaction, the loan is canceled.
- Aave’s Algorithm. The protocol’s core mechanism keeps track of the liquidity reserve and collateral price fluctuations. If the value of collateral drops below a threshold, users can get a discounted price as a bonus for liquidating their loans. By working this way, Aave makes sure that the contract pool maintains a certain minimum amount of liquidity.
- Aave’s Rate Switching. This feature offers the flexibility to combine stable and variable rates to achieve the most profitable outcome.
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.
ETHLend vs SALT
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:
- Basic trading between ETH, DAI, and USDC
- Lending funds and collecting interest
- Cross margin trading
- Isolated margin trading.
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.
- Lending. Lenders earn interest by adding collateral to debt reserves which is used to fund loans and trades and receive a share of the daily interest paid by borrowers, in proportion to their share in the debt reserve.
- Borrowing. Borrowers can take loans of up to 70% of their collateral’s value. What’s more, Nuo allows users to over-collateralize their loans which then can be withdrawn from the platform.
- Margin Calls. Nuo monitors margin positions off-chain (centrally) and calls contracts when a position has gone under margin maintenance. In case the price feed confirms the position to be under margin maintenance, Nuo executes a liquidation.
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:
- Easy Access. All it takes to start is a username, email address, and password. No existing digital wallet, browser extensions, or additional tools are required;
- Simple Wallet. Dharma’s crypto wallet automatically earns interest on either DAI or USDC;
- High Security. Each withdrawal through Dharma requires confirmation and approval. The loss of funds is virtually zero;
- Fiat Gateway. Dharma enables its users to deposit and withdraw fiat. Funds can be sent directly from a debit card, or to a bank account as desired.
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 Exchange Platforms
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.
- Market Maker. Uniswap itself is a market maker that sets prices & exchange rates, and enables you to trade directly with its protocol through the use of Ethereum contracts without the need to find a counterparty.
- Arbitrage Opportunities. Uniswap offers opportunities for arbitrage and works through a pooled liquidity model that allows traders to swap between any of the ERC20 compliant tokens and earn fees from trades done against the liquidity pool they supplied to. Fees go to the pool creators based on their share.
- Wallet Support. The team has added support for WalletConnect, WalletLink (Coinbase Wallet), Portis, Fortmatic, and Trust Wallet, so that traders can dynamically switch between wallets through their account.
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:
- Open source framework for forwarding contracts;
- Efficient order matching and cross-relayer arbitrage;
- Support for signature standards like ECDSA, EIP-712, and BLS;
- Ability to use custom signature-verification logic;
- Capacity create “filter contracts” for permissioned liquidity pools;
- Bulk order cancellations with a fixed-sized transaction;
- Trade widget support.
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
- KyberSwap Feature. Like other networks in the DeFi space, Kyber boosts user experience through direct and instant token conversion right from their wallet.
- Kyber DApp Integrations. Recently, Kyber carried out integrations with DApps like Furucombo, SimpleDeFi and SNX Link as each of them offers unique features. Furocombo arranges multiple protocols in sequence, SimpleDefi provides high interest lending rates, and SNX Link facilitates workflow management.
- Supported Tokens: BAND, PNK, RSV, RSR, KEY.
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.
- Plasma Technology. The protocol is pioneering the use of Plasma, which classifies as an off-chain solution acting as a layer on top of the ‘main’ Ethereum blockchain. Plasma consists of smart contract-based sidechains that provide more transaction throughput.
- eWallet Suite. This feature allows users to build and integrate a front-end UI for different types of digital transactions.
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:
- User A broadcasts a request invoice to User B;
- B then receives the request and pays in a click;
- A gets the money instantly.
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+
- cWallet. To transfer value across the network, Celer offers a handy wallet to its users to store its native CELR tokens.
- CelerX. Celer team has launched a mobile app for eSports gamers that has reached 100,000+ users, enjoying real-time interactions and instant crypto prize payouts.
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+
PixelPlex’s Echo Leveraging DeFi Services
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:
- Integration with Bitcoin. Echo uses Ethereum smart contracts, which is in-line with the modern practices. Further, in addition to Ethereum, Echo network is powered by the integration of Bitcoin’s blockchain. Now lenders, decentralized exchanges, enterprise-level DApps, insurance platforms, and others can use domain-specific smart contracts through Echo, while utilizing any of the ERC20 as well as BTC as a native currency.
- Compatibility with Solidity & EVM. Our team made it way easy to launch Ethereum-based DApps and deploy smart contracts on Echo with minimal-to-zero changes. We showed how it’s done by migrating to 0x protocol and leveraging BTC as a native asset.
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.
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