The relatively nascent, but incredibly growing and highly rewarding field of Decentralized Finance (DeFi) is currently closing in on $4.5B total value locked (TVL), inside its many protocols and services. At the time of this writing, the DeFi TVL has reached $4.27B and the biggest DeFi protocol Maker’s dominance has hit 31.42%.
The term “Decentralized Finance” otherwise shortened as DeFi refers to a group of permissionless and trustless financial protocols, smart contracts and services, being built on decentralized blockchain systems (mostly Ethereum currently), which can work together as pieces of a larger puzzle, similar to the traditional finance systems. Here are the top 3 and top 2 up-and-coming DeFi protocols, which are killing the game.
1. Maker Protocol – Decentralized Collateralized Stablecoin – $1.34B TVL
The largest DeFi project – Maker is an over-collaterized credit issuance and collaterized stablecoin protocol with decentralized price stability mechanism. It has two distinct tokens, MKR and DAI. The MKR token is used to open vaults, lock in collateral assets (ETH, BTC etc.) and generate the stablecoin DAI, which is pegged 1:1 with the United States Dollar (USD).
The users can use the debt issued in the form of DAI for other purposes, essentially having access to credit without liquidating their original assets. If the user decides to convert DAI back to collateral, they need to return the borrowed amount plus the interest generated, back to the vault. The interest fees is paid to MKR holders for maintaining the system.
2. Compound – Automatic Lending And Borrowing – $815.5M TVL
The Compound is a community governance based decentralized DeFi protocol, which allows users to lend or borrow assets against collateral. The users can supply assets to the liquidity pool to earn continuously compounding interest. The governance token used is COMP, which allows holders to vote on important parameters change and adjustments, in the system.
3-Synthetix – Derivatives Issuance And Trading – $538M TVL
Synthetix is the third largest DeFi project by TVL, its essentially a synthetic assets (Synths) creations and trading platform. The Synths are freely tradable ERC-20 tokens, which can have their value tied to and tracked with any real world asset, which allows limitless potential.
Synthetix supports over 30 Synths representing FIAT, commodities, cryptos etc. The native token is SNX, which in locked in collateral alongside ETH to mint Synths. The Synths are tradable across the Synthetix’s decentralized exchange, the trading fees from the noncustodial DEX is paid to SNX holders.
Up And Coming DeFi Projects
4. Bancor – Automated Market Marking – $27M TVL
The first DeFi project, Bancor launched through ICO funding mechanism back in 2017, introducing the Automated Market Making (AMM) concept. It delivered an order-book-less non-custodial trading (or conversion of tokens) without a direct counter-party, but rather sourcing liquidity from people staking tokens in pools to earn conversion fees.
Many of course, copied the concept later, in line with the open source nature of cryptocurrency technology and AMMs soon become a commonplace. To the extent, that AMMs or order-book less decentralized exchange (DEX) However, like the the first iteration of any new technology, it had its share of problems.
Introduced on 31 July this year, Bancor v2 aims to rectify the problems with first generation AMMs. On a limited rollout currently, it features advancements such as single token liquidity provision, sourcing data oracles from Chainlink to eliminate impermanent loss, reduced slippage design, liquidity amplification (for both stable and non-stable coins) and support for lending pools.
Once implemented in full, it will enable orderbook-less DEX to compete more effectively with centralized exchanges. It has been noted by major analysts that Bancor v2 will become a liquidity black hole, attracting liquidity from major pools, marking record TVLs and an appreciation of BNT token price in the future.
5. Akropolis Protocol – Undercollaterized Loans And Passive Investing / Savings Platform – TVL Not Available
The Akropolis Protocol is an easy-to-use suite of aggregated DeFi products, designed for financial operations and automated decision making. The principal component is the AkropolisOS, on which the other two undercollateralized loan focused Sparta (launched) and automated passive mixed investing/income product focused Delphi are being built on.
The Akropolis Protocol will provide DeFi equivalents of core financial services of insurable savings (variable and fixed rate savings deposits) and access to credit on relaxed terms. The platform has integrations with Compound, Fulcrum, Aave, Maker, Curve and dYdX.
The Akropolis Protocol will soon introduce the fully functional Delphi product, DeFi yield re-balancing module, liquidity mining, yield farming, crypto/fiat on-off ramp, support for USDT/USDC/RSV stablecoins, improved UI/UX, insurance of its products and a decentralized governance mechanism. Its also one of the most promising DeFi projects, with the price of its native AKRO tokens almost going 4x in the last months and expected to do better in the future.