The Most Popular DeFi Projects in 2021
DeFi continues to transform financial systems. In this article, we'll take a quick look at the most popular DeFi projects in 2021.
DeFi continues to transform financial systems. According to DeFiPulse, the total value locked in decentralized finance has already reached $50 billion. Therefore, it is not surprising that there is a growing interest in this market from the business side. For whatever purpose you are interested in DeFi, be it investing or creating your own product, you need to keep an eye on the biggest market players to keep abreast of the latest trends. In this article, we'll take a quick look at the most popular DeFi projects in 2021.
The DeFi market is developing rapidly and there are more and more decentralized platforms designed to solve the problems of the financial sector. At the moment, decentralized exchanges, lending/borrowing platforms, and DeFi aggregators are the most promising and demanded solutions. According to DeFi Pulse, DEXs and lending protocols form the top 5 in the ranking of projects with the highest value locked (USD) in them. And according to Messari, about 20% of the total trading volume of non-custodial Ethereum exchanges is generated with the help of DeFi-aggregators. So let's take a closer look at these types of promising DeFi projects.
A decentralized exchange (DEX) is an exchange that operates on the basis of a distributed ledger. DEXs act only as platforms to compare rates for buying or selling custom assets. They are anonymous and don’t store user funds. Decentralized exchanges provide peer-to-peer trading without any financial intermediaries. Thanks to such advantages as privacy, security, accessibility, and transparency, DEXs are gaining more and more users. The development of such an exchange requires good blockchain expertise from a team.
Here are examples of the most popular DEXs on the market.
Uniswap is a leading decentralized crypto exchange powered by Ethereum. The peculiarity of the protocol is that it uses liquidity pools instead of order books. Using Uniswap, anyone can quickly switch between ETH and any ERC20 token, or receive a commission by providing any amount of liquidity. Plus, liquidity providers can add or withdraw their funds at any time. Uniswap was built in 2018 and is currently the fourth largest decentralized finance platform, with over $3 billion worth of crypto assets locked into the protocol.
IDEX is a decentralized exchange that combines great performance with security. The exchange is currently available on Ethereum and Binance Smart Chain. One of the main advantages of this DEX is that users can stake their IDEX tokens to protect the exchange and earn 50% of all IDEX trading fees as a reward. Also, IDEX has developed an innovative level-2 system that increases settlement throughput. Today, IDEX has about $16 million blocked in the protocol.
According to DeFi Pulse, SushiSwap ranked third on the list of projects with the highest value locked in the protocol. This DEX also uses liquidity pools rather than an order book. Any user can create a liquidity pool for their own token by providing ETH and ERC20 of their choice. SushiSwap is completely decentralized and community-driven through voting. The fees collected by SushiSwap are shared between $SUSHI token holders and liquidity providers.
Lending/borrowing platforms are services that directly connect borrowers and lenders on a crypto network. The main advantage of these platforms over traditional loans is the absence of intermediaries and the availability of services for any user, regardless of geography and credit history. Any blockchain user can transfer coins to a specific lending platform, which will lend the cryptocurrency to another user at interest. The entire lending process is optimized through smart contracts.
Lending platforms are one of the most demanded DeFi solutions. Let’s take a look at the biggest market players.
Maker is a decentralized lending protocol on Ethereum, created in 2015. It supports DAI, an ERC-20 stablecoin that is pegged to the US dollar. The protocol allows users to block a certain amount of ETH in MakerDAO smart contracts as collateral for a loan and receive a certain amount of DAI. In 2020, DAO has become the 25th largest cryptocurrency at over $800 million in market capitalization. Generally, Maker is one of the largest decentralized protocols on the Ethereum blockchain and the first decentralized financial app to be widely adopted.
Aave is a P2P lending protocol created in 2017. It also runs on Ethereum. Aave users can borrow against most of the supplied assets. Interest rates are algorithmically adjusted based on supply and demand, but Aave also allows borrowers to choose a stable rate that changes less frequently. One of the unique advantages of Aave is flash loans or loans without providing collateral. In this case, the borrowing and the repayment take place within the same transaction. If the user is unable to repay the loan, the transaction is automatically canceled.
Compound is an Ethereum-based protocol that allows users to borrow assets against collateral and earn interest for providing loans. According to DeFi Pulse data, Compound is currently ranked second in the ranking of decentralized financial applications by capitalization with a result of $8 billion.
Finally, we come to aggregators. This is a fairly new direction, so now entrepreneurs have a great opportunity to build their own DeFi aggregator and take a rightful place in the market. An aggregator is a complex platform that collects and sorts information about various DeFi services, displaying information in a single interface. With DeFi aggregators, users save time and can quickly pick the best deal on the market. There are many types of DeFi aggregators that cover the most diverse needs of users of the DeFi ecosystem. Here are examples of some of them.
Zapper is a platform that allows you to manage DeFi assets through a simple interface. It provides users the opportunity to manage their portfolios from one dashboard, including access to liquidity pools, yield farming, swaps, and more. This aggregator integrates with 54 DeFi protocols, including 1inch, Aave, Alchemix, Alpha, and more, and allows portfolio rebalancing by moving the capital to other platforms.
Another aggregator that aims to enable users to trade at the best rates from a single dashboard, as well as invest, lend and borrow assets. Currently, Zerion supports over 50 protocols. Application users can track their assets in real-time with live price updates. More than $47 million in transactions have been made through the platform since the app has been running since 2019, according to Zerion representatives.
1inch is an aggregator that enables users to exchange crypto-assets at the most favorable rate with minimal "slippage". It operates on Ethereum and Binance Smart Chain. As of January 2021, 1inch exchange turnover was about $155 million a day. This aggregator currently supports over 20 liquidity protocols. The advantage of the aggregator is that 1inch doesn’t charge a token exchange fee, and the fee that will be paid for swaps depends on decentralized exchanges.
Interest in DeFi is on the rise in 2021. The most demanded types of decentralized apps with the highest value locked in their protocols are lending platforms, decentralized exchanges, and DeFi aggregators. Due to the good compatibility of DeFi protocols, many platforms provide users with multiple asset management tools at once. You can find a solution on the market that meets any of your needs, be it lending, trading, payments, and so on.
If you are looking to invest in DeFi or create your own decentralized product, now is the best time to do so. For instance, Zerion is a great example of how an innovative product can quickly conquer the market and become one of the most significant players in it. Therefore, enlist the support of an experienced blockchain development team to help you bring your idea to life, and go ahead!
Marketing manager at IdeaSoft.io, a software development company providing complex business solutions for innovative businesses all over the world.