In recent times, one of the most popular development in the cryptocurrency space are these two words - Decentralized Finance abbreviated as DeFi. Technically, decentralized finance is generally referred to as digital assets and financial smart contracts, protocols, and decentralized applications (DApps).
A greater number of DeFi protocols are being built on Ethereum but other blockchains like EOS and BSC have some protocols running on them. In a more simpler term, decentralized finance can be said to be cryptocurrency projects that allows for traditional financial operations like lending, borrowing as well as liquidity providing without the need of third parties like banks. Operations are automated once certain parameters are in place.
APPROXIMATELY 39 BILLION US DOLLARS HAVE BEEN INVESTED IN DEFI!!!
Within a short space of time, numerous DeFi projects have been brought into existence (about 80 as at this post) and billions of dollars have found their way into decentralized finance. Below are a few defi projects to be discussed briefly.
Maker DAO: www.makerdao.com
This is the most outstanding and most performing decentralized finance project that has seen approximately $6.1 billion being invested in it. DeFiPulse ranks it number one. MakerDAO which is built on Ethereum blockchain is a decentralized credit platform. This means that on MakerDAO, a user can get a loan after fulfilling certain requirements. Note that, you can only borrow DAI on MakerDAO platform. DAI is a stable coin which is pegged to the United States Dollars (USD) and it's similar to USDT. This means that the price of DAI fluctuates in a very little margin.
MakerDAO equally supports a coin with the ticker, MKR. Remember, in DeFi projects or platforms, governance is carried by users through a process called voting. To be able to participate in the governance of MakerDAO system, you must hold the MKR token. Holding MKR allows you to vote in the system. More so, Maker also has a feature called the Dai Savings Rate (DSR). DAI holders can lock their DAI into Maker’s DSR contract and earn interest in DAI.
N/B: MAKER HAS 15.25% DOMINANCE IN THE DEFI MARKET!
How to Borrow DAI on Maker
- Firstly, open a Vault
- lock in collateral such as ETH or BAT,
- borrow DAI; It is worthy of note that users can only borrow Dai up to 66% of their collateral’s value. For example, you lock up 100 BAT as collateral, you cannot borrow more that 66 DAI tokens.
This is another well-performing DeFi project and it is ranked number two on DeFiPulse. Its TVL is about $5.1 billion dollars. Compound is an algorithmic money market protocol on Ethereum that lets users earn interest or borrow assets against collateral. Compound.finance was initially launched on mainnet in September 2018 but later upgraded to v2 in May 2019. The network supports the following coins: COMP, BAT, DAI, SAI, ETH, REP, USDC, WBTC, and ZRX. Any of these assets can be borrowed or supplied on compound's native interface so far an accepted collateral is being locked (that is, if borrowing)
On the other hand, any user to supply or provide liquidity to the pool and in return earn rewards for providing liquidity. Now, assets supplied or liquidity provided are represented by what is called cTokens. Users can only borrow up to 50-75% of their collatteral's (cTokens's value) and liquidaty can be removed at anytime. On compound.finance, proposal voting and governance can only be done by COMP token holders. Conclusively, compound is an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications.
Synthetix was initially known and developed as a stablecoin project "Havven." By definition, it is a decentralized platform developed on Ethereum blockchain which allows for the creation of on-chain synthetic assets called synths that in turn tracks the value of real-world assets. By real-world assets, we mean assets like fiat currencies, gold, silver and cryptos etc.
Synthetix has a native token called SNX which is trading on exchanges like Binance. On synthetix.io, holders can lock in collateral such as SNX and ETH to mint Synths. Minting and burning of synths can be done on Mintr - the synthetix network.
bZx is a financial primitive for shorting, leverage, borrowing, and lending that empowers decentralized, efficient, and rent-free blockchain applications. bZx protocol is committed to developing the most decentralized solutions such that it is the only protocol (currently) to make use of decentralized price feeds. The bZx protocol has a governance token with the ticker BZRX. The total supply of BZRX is 1.030B. Currently all but 140MM of the tokens are inside the vesting contract. Holders of BZRX can vote for protocol upgrade as well stake to earn rewards.
bZx protocol affords developers a platform to build applications that empower lenders, borrowers, and traders with the most flexible decentralized finance protocol on Ethereum.
With bZx, many defi projects have been built and they include; Fulcrum and Torque etc.
Uniswap is basically a cryptocurrency marketplace where crypto traders/ investors can buy, sell and/or stake crypto assets that is, providing liquidity. Note that, Uniswap is fully decentralized in that it makes use of liquidity pools instead of order books. Order books are adopted by centralized exchanges but on Uniswap.io, anyone can quickly swap between any two cryptocurrency assets or provide liquidity to the pools to earn rewards on transaction fees.
Uniswap has a native token called UNI which gives one access to participate in the protocol's governance. On Uniswap, liquidity providers can add to or withdraw their funds at any time they feel like. However, Uniswap which was the first ever decentralized marketplace now has competitors in the likes of SUSHISWAP, pancakeswap etc. On the whole, the Uniswap protocol empowers developers, liquidity providers and traders to participate in a financial marketplace that is open and accessible to all.
Decentralized Finance has taken the cryptocurrency space by storm and it doesn't look like it is done yet. It is best to carry out careful study before making investments.
Posted Using LeoFinance Beta