2021 has shaped up to be a breakout year for large-cap cryptocurrencies such as Bitcoin and Ethereum.
The two coins have soared in popularity over the last few months and energized the broader crypto ecosystem. In its stead, NFTs hit the media, crypto exchange Coinbase went public and lesser-known coins and tokens began to surge.
One group of lesser-known cryptos are tokens for decentralized finance (DeFi). These tokens exist on blockchains, acting as assets which signify ownership, voting power, stakes or financial interests in certain assets or projects. In the realm of DeFi, tokens are generally kicked back to crypto nerds when they stake assets, provide liquidity to projects or participate in certain activities.
Since the world of DeFi has grown quite a bit, we wanted to take a look at some of the most interesting DeFi tokens (and the projects behind them) to give beginners an idea of where to get started investing in this new and exciting space. Let’s dive in:
1. Compound ($COMP)
The Compound Protocol allows investors to lend or borrow Ethereum, stablecoins and tokens on a decentralized lending market. This decentralized lending market sets interest rates based on an algorithm. This balances supply and demand in assets, which is made transparent, to help keep the market efficient and transparent. People who borrow or lend are then rewarded with a $COMP token. This then entitles them to a say over how the protocol is used.
As of April, Compound is the biggest DeFi protocol in the world. It stores over $14 billion of assets, primarily in Ethereum, USD Coin and DAI. With those hefty assets, Compound has gained a $2.6 billion market cap. It might be an interesting buy for people who believe in the future of Compound and want to have a say in its future.
2. Maker ($MKR)
When people think about decentralized finance, many minds drift to Maker. Maker allows people to take out crypto-backed loans by minting a stablecoin called Dai. The benefit of Maker is that crypto HODLers never have to sell their Ethereum, Bitcoin or Ethereum-based tokens. Instead, they can just give Maker custody of their assets in exchange for Dai, which will carry a variable interest rate. This process can be a little mystifying to some people, but you can read more about it here.
As of April, there was $3.6 billion worth of DAI minted from assets on Maker. Maker and its native token, $MKR, held a market capitalized of $3.5 billion. $MKR offers holders control over the protocol, its interest rates and available assets. It becomes a “buyer of last resort” in the case that Maker needs to step into their lending market.
3. Uniswap ($UNI)
Say for example you wanted to swap some Ethereum for an Ethereum token like USD Coin. Some people could do that on a platform like Coinbase or Binance. Or, for some crypto-conscious folks, they might choose to use decentralized exchanges (DEX). DEXes carry many benefits over traditional players. They cut down on middlemen, use algorithms to determine pricing, offer competitive fees and help create an efficient market that allows users to swap one token for another token. Uniswap is Ethereum’s premiere DEX. Simply put, it allows people to offer up liquidity (assets) to create a market for borrowing and exchange.
As of April, Uniswap’s protocol (as valued by $UNI) carries an astonishing $16.5 billion market cap. The protocol flexes billions of dollars worth of liquidity, which serves as the backbone for its exchange, and carries billions in volume everyday. As of April 19, Uniswap had nearly $8 billion worth of assets in liquidity. It had a volume of $8.7 billion for the week of April 11 to 17. By owning $UNI, Uniswap’s governance token, people are allowed to vote on proposals which affect its future.
4. Aave ($AAVE)
Aave is a fast-growing DeFi protocol that allows people to borrow or lend money in dozens of Ethereum-based tokens and assets. In many ways, Aave is like Compound. However, it has one critical difference at the moment: It offers dozens of asset options. This is unlike Compound, which has honed in on a small handful of assets. This versatility has allowed Aave to become a fast-growing, flexible alternative to Compound and other lenders.
As of April 2021, Aave carries a $4.8 billion market cap. Aave is carrying $7.2 billion in assets on its platform. Those who buy Aave are entitled to vote on proposals and affect the future of the platform. This might include deciding which assets are listed, how the protocol operates, and other governance activities.
5. Curve ($CRV)
As of April, the fifth biggest DeFi platform by total assets is Curve. It also happens to be one of the most complex. Curve is a DEX designed for swapping between stablecoins and similar tokens. There are lots of stablecoins: USD Coin, Tether, Dai, Binance USD and the like. There are also lots of “tokenized versions” of other assets (synthetics) such as Wrapped Bitcoin, renBTC and sBTC. Curve is a platform helping people transfer assets between these alike assets.
As of April, the Curve DAO token carries a $893 million market cap. It also holds $6.3 billion in deposits. The $CRV token is distributed to liquidity providers on the protocol.