DeFi, short for Decentralized Finance , has been the subject of much excitement. The attempts to recreate traditional financial instruments in a decentralized architecture have gathered much pace and enthusiasm. Multiple projects have come up – some that attempt to solve an existing challenge with the technology and some that seek to expand its applications. Challenges such as interoperability, addressing market volatility, and accessing external data are being addressed, among many others.
Let’s take a look at some of the most exciting DeFi projects to watch out for.
We know the crucial role smart contracts play in DeFi systems. But there is still a connectivity problem – smart contracts cannot access data on their own. Executing any smart contract requires external data such as API or off-chain data may be required.
Launched in 2017, Chainlink, as the name suggests, solves what is called ‘the oracle problem,’ by providing a reliable connection to external data that is end-to-end secure. This makes tamper-proof and secure transactions practically possible via smart contracts.
Since May 2019, ChainLink’s price trajectory has been on a fluctuating but upward climb. It hit its highest price so far in July 2020 at $8.66.
Compound is a DeFi protocol built on Ethereum. It is centered around enabling people to borrow and lend loans using DeFi systems and establishes money markets with algorithmically set interest rates based on supply and demand. Therefore, this would allow users to exchange the time value of Ethereum assets.
In other words, borrowers and lenders can lock their crypto-assets in the protocol, and the interest rates that they pay or receive on their assets depending on the demand and supply of each crypto-asset in the market.
Launched in 2017, the Compound cryptocurrency’s price touched $350.95 in June 2020. It has tapered off since then.
A decentralized, flexible, scalable, and non-custodial money market protocol, Aave allows users to borrow and lend a range of cryptocurrencies using varied or stable interest rates. Its unique features also include flash loans, uncollateralized loans, unique collateral types, and rate switching.
Also launched in 2017, Aave prices reached a peak in January 2018, followed by a long period of dip until it eventually spiked again last month.
#4 Synthetix Network Token
Built on Ethereum, Synthetix is a token trading platform that allows users to bet on synthetic assets, also known as ‘Synths.’ Synths mirror prices of real-world assets such as currencies, commodities, or gold. Therefore, users hold Synths without actually holding real-world assets. The project was initially started as a stablecoin project but later shifted to DeFi. The SNX coin prices have accelerated upwards since the end of May 2020 and reached a peak in July.
Launched in July 2018, Augur is essentially a decentralized prediction market that runs on the Ethereum blockchain. It is an application of blockchain and cryptocurrency to improve the prediction markets. The underlying concept is the ‘wisdom of the crowd.’ It allows users to bet on anything – from sports to the economy – at low fees and with guaranteed payouts. Augur’s cryptocurrency REP is currently ranked at #50 and saw its highest prices in December 2017 and January 2018 when it breached the $100 mark.
Ren is a DeFi protocol that aims to provide access to inter-blockchain liquidity for all dApps. In other words, it solves the problem of interoperability and allows users to carry out permissionless and private transactions. In its own words, Ren is “bringing BTC, BCH, and ZEC to your Ethereum dApp”, which is a fairly exciting idea in itself. Did you know there’s more Bitcoin on Ethereum than on Bitcoin’s own Lightning Network?
Ren reached its all-time high in July 2020.
Kava is another DeFi project that provides interoperability to users. In some ways, it is similar to MakerDAO. It allows users to deposit crypto-assets and borrow USDX, Kava’s stablecoin. More recently, it was also launched on Cosmos, with a vision to become a ‘DeFi hub’ in Cosmos’s model of hubs and spokes. The Kava cryptocurrency has seen a stable journey, but in recent times, it has seen a spike and hit its peak in July 2020.
#8 Band Protocol
This particular project aims to band communities together via a decentralized curation protocol. It creates token-curated communities, and each community can issue its personalized token to curate data in that specific community. Thus, a cross-chain data oracle platform is formed, aggregating, and connecting real-world data and APIs to smart contracts. Launched in 2019, its cryptocurrency, BAND saw its highest price at $4.56 in July 2020.
COTI aims to build a system that solves the problems of traditional finance, such as high expenses and lack of inclusion. It makes use of a concept called a directed acyclic graph (DAG) and a Proof of Trust consensus algorithm. The multi-day structure allows businesses to have their own tokens, making it the first enterprise-grade fintech platform that empowers organizations to build their own payment solutions and digitize currencies.
COTI prices saw an all-time high in July 2019 but declined later, only to show an upward trend in 2020.
The EOS project aims to provide user-friendliness and scalability. While It is built for both private and public blockchain networks and is customizable for a variety of use cases, it also functions as an ecosystem for numerous DeFi projects such as the EOS DT. Since it is built for scale, it could be ready for mass adoption by industries.
A unique aspect of EOS was its dedicated governance architecture. It runs on a delegated Proof of Stake (POS) blockchain.
EOS prices peaked only months after its launch in 2018, but since then, it has seen an overall decline. However, the currency still ranks at #11.
Ox is another open-source protocol that enables users to engage in a peer-to-peer exchange of assets. Built on the Ethereum blockchain, it features a robust smart contracts infrastructure and enables liquidity for assets.
The protocol is already powering many decentralized exchanges, such as Paradex and Radar Relay. The ZRX cryptocurrency was at its highest price in January 2018 and of late, it has been at a steady low but is crawling upward.