Decentralized finance (DeFi) is one of the hottest trends to emerge out of the crypto markets. DeFi refers to financial services built on the blockchain, mainly on the Ethereum network, that allows anyone to access financial products and services online in a decentralized and borderless manner.
Today, DeFi users can borrow, lend, trade, invest, and make payments without the need for a financial institution as an intermediary. Instead, the role of financial institutions is replaced by decentralized smart contract protocols.
Today, the total value locked up in DeFi has more than doubled from January this year to stand at over $42 billion.
Top DeFi Apps
In this guide, we will list twelve leading Ethereum-powered DeFi protocols ranked by the dollar amount locked up in each platform’s smart contracts.
We have referenced data from DeFi analytics provider DeFi Pulse to come up with our list of top DeFi applications.
Maker is the most notable DeFi application in the market today. The platform has over $7 billion worth of tokens locked in Maker protocol smart contracts.
MakerDAO is a decentralized lending application on the Ethereum blockchain that supports the Dai (DAI), a stablecoin that is pegged to the USD. You can use Maker to open a vault, lock in collateral such as ETH, and generate DAI as debt against that collateral.
DAI is the only stablecoin that you can use without limitations. Unlike other dollar-backed stablecoins, it does not hold USD in the bank. Instead, the Maker protocol relies on smart contracts and collateralized ETH to maintain price stability.
Moreover, DAI holders can lock their DAI into Maker’s Dai Savings Rate (DSR) contract and earn a variable interest in Dai, produced from stability fees.
Compound is a decentralized money market protocol based on the Ethereum blockchain that allows digital asset holders to borrow and lend crypto against collateral. You can add assets to Compound’s liquidity pool and immediately start earning compounding interest. Interest rates adjust automatically in relation to supply and demand.
Compound sets aside ten percent of the interest paid as reserves, with the remainder going to liquidity suppliers. The protocol has over $6 billion locked up in its liquidity pools, making it one of the most popular DeFi platforms out there.
Aave is a decentralized, non-custodial liquidity market protocol where you can participate as a lender or borrower. Lenders provide liquidity to the market to earn passive income, while borrowers can obtain overcollateralized and undercollateralized loans.
Aave provides trustless, uncollateralized loans where borrowing and repayment must happen in the same transaction. The protocol’s native governance token is LEND but can support 16 digital assets (13 of which can be collateral).
Presently, Aave has over $5 billion locked up in its smart contract.
Uniswap is a decentralized exchange protocol that allows users to swap between ETH and ERC20 tokens on-chain or earn fees by providing any amount of liquidity. The conversion of ERC20 tokens is done through a simple UI in a private, secure and non-custodial manner.
Uniswap enables users to create markets (i.e., liquidity pools) that help improve the protocol’s exchange liquidity. Each liquidity pair is denoted by a unique, freely-transferable ERC20 token.
Currently, $4 billion worth of Ethereum tokens is held in Uniswap liquidity pools.
SushiSwap is a decentralized application that aims to incentivize a network of users by providing a platform where users can purchase and sell digital assets. Essentially, it’s a copy and paste of Uniswap, with some changes to Uniswap’s open-source code.
The platform allows you to make a liquidity pool for your own token by providing ETH and any ERC20 of your choice and swapping out one token for another.
With over $4 billion locked in its trading pools, SushiSwap has emerged as a leading DeFi platform that enables you to trade digital assets without the need of any intermediaries.
Curve Finance is an Ethereum based decentralized exchange liquidity pool tailored for efficient stablecoin trading. The protocol allows low slippage swaps of stablecoins such as USDT, DAI, and USDC.
Tokens held by liquidity pools are also supplied to the Compound protocol and generate income for liquidity providers. Currently, there are seven Curve pools, including Compound, PAX, BUSD, Y, REN, sUSD, and sBTC, which support swaps for a number of stablecoins and digital assets.
Currently, Curve Finance has $4 billion worth of digital assets locked in its liquidity pools.
Synthetix is an Ethereum based decentralized investment platform that allows users to produce and trade so-called ‘Synths,’ which provide on-chain exposure to tokenized, synthetic versions of physical assets.
Originally known as Havven, Synthetix allows users to invest ETH in synthetic assets that can represent dollars, gold, bitcoin, stock, and more. Trades on the non-custodial platform happen on a peer-to-peer basis.
Synthetix has a native token called SNX. Users can lock in collateral such as SNX and ETH to mint Synths. The Synths are essentially freely tradeable ERC20 tokens.
Presently, Synthetix has around $2 billion held in its liquidity pools.
Balancer is another decentralized exchange (DEX) that allows you to buy tokens at the best possible prices and swap them directly. Unlike other DEXes, where liquidity pools only contain two assets, Balancer pools come with up to eight digital assets to improve liquidity.
Users can deposit liquidity and earn money from the trading fees of the pool. Alternatively, they can trade via the DEX to exchange tokens.
As mentioned above, they are different design options for balancer pools. Private pools are for private purposes and should not tolerate external liquidity providers. The design of the pool is solely determined by the creator and can be customized as such.
Conversely, shared or public pools are open to all stakeholders but are final and cannot be customized in their configuration.
$1.7 billion worth of digital assets is currently held in Balancer’s liquidity pools.
Bancor is a decentralized exchange (DEX) protocol that allows users to swap digital assets instead of having to go through a centralized exchange.
The Ethereum based application utilizes smart contracts to enable the non-custodial trading of digital tokens. Bancor plans to create liquidity for digital assets through the use of what it terms ‘Smart Tokens.’
Bancor has a native token called Bancor Network Token (BNT), which serves as a Smart Token hub connecting other digital tokens in the Bancor ecosystem.
Over $1.5 billion of cryptoassets are currently locked in the Bancor Protocol.
Badger DAO is a decentralized autonomous organization that aims to build infrastructure and products for bringing bitcoin into DeFi. This means users will be able to use bitcoin in DeFi to mint, borrow, provide liquidity, elasticity, and many more.
For instance, users will deposit different types of tokenized bitcoin, such as WBTC, renBTC, and tBTC, in Badger’s ‘Sett Vault’ to generate automated yield. The Setts will automatically invest your tokens according to yield-generating strategies that optimize returns and reduce costs.
The native cryptocurrency that governs the Badger DAO is DIGG. At the time of writing, over $1.3 billion worth of assets is locked in the Badger smart contract.
InstaDapp is a trustless smart wallet for decentralized finance. The application enables users to manage, optimize, and deploy their assets and receive the best returns across various protocols.
For new entrants to the DeFi space, InstaDapp has a friendly UI that allows users to manage their DeFi investments across protocols such as Maker, Uniswap, and Compound.
Currently, over $1 billion are locked up in InstaDapp smart contracts.
Alpha Homora is a yield farming protocol on the Ethereum blockchain. It allows lenders to earn interest on ETH and generate yield farming revenues.
Unlike other yield farms, however, Alpha Homorra allows users to take leveraged positions to increase their trading fee income as a liquidity provider and (potentially) boost their yield farming returns.
Alpha Homora has over $900 million worth of assets locked on-chain.
The fast-growing DeFi market is a testament to the financial innovations that are emerging from the blockchain industry. Should the current DeFi growth rate continue, we could see decentralized, borderless, open finance solutions replace many of the function’s that today’s centralized financial institutions offer.
The information in this article is for informational and educational purposes only and should not be considered financial or investment advice. Investing in ICOs, IEO’s, cryptocurrencies, or tokens is highly speculative, and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.