**Maker DAO – Borrowing/Lending**
MakerDAO is a decentralized mechanism for collateralized loans in which users may lock up their ETH in exchange for DAI, the DAO’s stablecoin. When someone locks up their ETH, they may take out a lesser loan in DAI, which is tied to the US dollar. A deposit of $1000 ETH entitles the customer to a loan of around $650. When the individual wishes to reclaim their ETH, they just repay their loan plus any costs. MKR, the protocol’s native token, is utilized in two ways. As the price of ETH falls, it largely serves as a kind of support for the lending system. When a large number of loans are liquidated at once, MKR is formed and sold to pay off the loans, as well as purchased back with the profits of the liquidation fees. It also functions as a governance token, enabling holders to vote on how much fees should be charged and what sorts of collateral should be accepted by the system’s smart contracts. Maker has become one of the DeFi boom’s flagship protocols, however as we witnessed with the market crash caused by Coronavirus, there is still substantial danger in investing/pooling money in these protocols, which may suddenly become destabilized due to unanticipated occurrences. Though Covid isn’t Maker’s first existential crisis, having dealt with hacks in the past, the community has persevered and demonstrated incredible endurance to move through these difficulties, frequently emerging stronger and with a more directed path. With a locked value of $6.57 billion, it is the biggest DeFi protocol.
The CRD Network is a decentralized bridge that connects crypto and traditional currency transactions. It functions as an API infra Hub – a data stream aggregator — and is an ETH sidechain. In other words, it has a direct relationship to crypto through its connection with Ethereum, but it has a link to traditional finance through connecting into bank APIs.
As a result, this ecosystem enables you to send and receive payments in any of the world’s main currencies, digital or fiat, as well as create apps that use this environment. At its heart, the CRD Network is a location where you can develop innovative decentralized finance apps that can interact with the rest of the world.
Because the ecosystem is open-source, everything goes; the only restriction is your creativity.
**Aave – Borrowing/Lending**
Aave is a decentralized network of collateralized lending pools that are managed by smart contracts and allow anyone to freely lend or borrow cryptocurrency. They plan to release version 2 of their protocol in December 2020. Previously, when holders supplied cryptocurrency as security on loans, it was tied to that collateral. Users may now quickly shift their collateral from one coin to another without having to repay their loan or withdraw it from Aave. This improves people’s capacity to manage liquidation risk by allowing them to exchange their collateral if the original asset’s price began to decrease. Holders of the governance token, AAVE, utilize it to make modifications to the protocol’s rules and regulations. In addition, holding the token grants the user numerous benefits like lower fees/rates, bigger borrowing limits, and early entry to particular pools. Aave has also developed “flash loans,” which are uncollateralized short-term loans issued and paid in the same block of transactions. This project is far from over with Aave’s version 2. According to CEO Stani Kulechov, planned reforms will strengthen and add subtlety to both governance and its quick loans while also striving to cut gas prices across the board.
**Kusari Network – Web3 Substrate and Full EVM**
The fully integrated and operating EVM is now undergoing testing on the Kusari chain. Once operational, the EVM will allow for the simple implementation of current smart contracts and D’Apps to its own chain, as well as the ability for crypto aficionados and traders to exchange their favorite currencies and tokens with ease and at minimal transaction fees.
Furthermore, Kusari empowers its community by putting blockchain power in the hands of its members. The Kusari Chain slogan is “No Restrictions, No Whitepaper, Just Pure Innovation,” and we think that this is the only way to accomplish real decentralisation.
The Kusari Chain has an extensive Staking and Voting system to which the community has complete access. Allowing each user to have a say in the chain’s future direction and providing them with the tools to ensure that the project and chain remain decentralized.
**Yearn Finance specializes in asset management.**
Yearn Finance is a DeFi platform that provides customers with tokens in exchange for crypto deposits, which are then loaned out through different other businesses such as Aave or Compound for the best rate of return. Yearn finance was founded by Andre Cronje, who quickly abandoned the protocol in favor of a smart contract that required a supermajority to implement modifications. There is a limited amount of 30,000 YFI tokens available. Yearn finance automatically reallocates investors’ assets and locates the greatest yielding DeFi products. In other words, it provides the ordinary crypto trader with access to more complicated tactics via an easy-to-use user interface. Its brand awareness and simplicity of use will guarantee that, as the industry matures, it remains many investors’ initial introduction to field farming techniques. Though not inherently risky, Yearn searches a variety of high yielding assets, which can frequently result in investors’ cash being invested in securities with which they are not personally comfortable. Though these aren’t wholly “risky,” it’s reasonable to wonder if many of the new investors attracted to DeFi through Yearn would feel comfortable if they were aware of some of the riskier methods their funds were susceptible to. Furthermore, the continuously changing market circumstances of cryptocurrency can result in wild price fluctuations throughout the market, and the value of yield farming assets is always at risk of becoming worthless.
**Uniswap is a decentralized exchange platform.**
Uniswap is the most popular and widely used Ethereum-based decentralized exchange (dex). Last year, it made news when it shocked early users by airdropping 400 UNI tokens (about $1,200 at the time) to anybody who had used the network. The UNI token governs the Uniswap exchange, and holders can vote on various ideas, eventually becoming the only decision makers of Uniswap. People may use Uniswap to trade any Ethereum-based token, and they can also contribute Eth and other tokens to supply liquidity, earn fees, and occasionally get additional incentives. Uniswap formerly controlled 20% of all cash locked in DeFi protocols and had approximately 50,000 daily users; it is still quite popular. The cryptocurrency has been extensively disseminated across the crypto community as a result of the unexpected airdrop. It’s also one of the most popular venues for introducing consumers to more advanced DeFi ideas like liquidity pools and yield farming. Many Uniswap users utilize the exchange not just to swap tokens, but also to receive incentives for supplying liquidity. Many of these prizes offer excellent returns, which is really appealing. However, there is an underlying risk that many individuals are unaware of. Impermanent (or Divergence) Loss happens when the price of the pooled token deviates significantly from the price specified by the user. The underlying numbers offered are slightly changed when the Automated Market Maker sells tokens to preserve the correct ratio. This risk is frequently countered by the fees and benefits collected, but it may be large in a turbulent market.
**Derivatives – Synthetix**
Holders of SNX tokens can stake them to build on-chain synthetic representations of real-world commodities like as gold, foreign currencies, and, most recently, oil. Holders may also build shorting products such as iBTC or iETH. Kain Warwick created Synthetix after raising roughly $4 million in private finance from Framework Ventures. Governance was previously managed by a foundation, which has subsequently been disbanded and replaced with three decentralized autonomous organizations (DAOs) over which SNX holders can vote on protocol choices. At its peak, Synthetix had over $800 million in total locked value and still has over $700 million staked with over $125 million in circulating synthetic assets. Their success demonstrates the high demand for the capacity to trade censorship-free real-world assets on-chain, and they are constantly researching, developing, and releasing new goods. Their inverse products (iEth, iBTC, iOIL, etc..) are a unique way to introduce shorting strategies to DeFi newcomers because each iSynth token has an entry point, an upper limit, and a lower limit beyond which the price is frozen and the inverse asset’s holder is liquidated into a USD pegged stablecoin to help manage risk. Sythentix’s approach of linking conventional legacy assets and new digital assets via these innovative technologies makes a compelling argument for SNX as the field expands and matures. One of Synthetix’s drawbacks is its exceptionally high collateralization ratio, which requires 750 percent of staked SNX to the value of the Synth asset. Furthermore, SNX is more volatile than other assets such as ETH, which might lead to increased risk when it comes to maintaining your ratio. Although ETH may be staked, it does not provide the same payment incentives as SNX.
**Lending/borrowing – Compound**
Compound is a system for decentralized crypto lending and borrowing that is powered by algorithms and smart contracts. Anyone with an internet connection and a cryptocurrency wallet like MetaMask may provide or borrow assets at interest rates determined by real-time supply and demand. This enables people to lend and borrow without having to go through a middleman like a bank. When users deposit crypto monies into Compound, they are given c-tokens (cETH, cDAI, and so on) that represent a claim to a share of the asset pool. Loans are overcollateralized in the same way that other DeFi systems are. That is, you must supply more value in cryptocurrency as collateral than you may borrow. Compound was founded as a firm by Robert Leshner and sponsored by venture capitalists, but since the issuance of the COMP token, it has steadily decentralized, delegating authority and governance to the community. Votes have been held on adding coins, adjusting interest rates, and a variety of other enhancement suggestions. One of the inherent dangers in Compound’s approach is the risk assumed by borrowers who utilize the cash to purchase more collateral. If an investor deposits ETH and subsequently utilizes their loan to purchase more ETH, a rapid decline in price might result in not just a call on their loan, but also the entire liquidation of their collateralized ETH. Overall, Compound is easy to use and comprehend, which will help it to remain a prominent role in the DeFi community as more people and institutions enter the area.
**Assets and Derivatives – RenVM**
Interoperability is a big issue with the existing DeFi system (and, indeed, the whole crypto field). That is, nearly 75% of the overall crypto market value is not on the Ethereum blockchain and so cannot participate in or interact with the existing major DeFi protocols. RenVM is attempting to fix this problem by encapsulating external assets and functioning as a decentralized equivalent of BitGo’s WBTC. Someone with bitcoin may submit it to RenVM, which functions as a decentralized custodian and then issues the Ethereum token renBTC, which is backed and has the same value as bitcoin. RenVM can provide this solution for virtually any digital asset and smart contracting platform, not only Ethereum. RenVM’s token, REN, is utilized as a bond to operate as a network validator “darknode.” It costs 100,000 REN to register and run a node, which is then locked within a smart contract and cannot be refunded until the user deregisters their node. This encourages participants to behave well. When an asset is moved between chains, a charge is collected and paid to the darknode operators.
**Decentralized Exchange – Kyber Network**
Kyber Network is a decentralized exchange and payments platform that enables users to instantaneously trade their tokens for other tokens without relying on a centralized order book. It makes use of “reserves,” which are pools of crypto assets that allow for many routes to convert tokens, eventually finding the cheapest price. Though comparable to Loopring, the Kyber Network has a major exchange interface and instantaneously swaps the token, whereas Loopring is the underlying protocol and network of multiple exchanges and serves as an orderbook. When changing ETH to another token, the Kyber smart contract first consults with multiple reserves to get the optimal exchange rate. Then you’ll look at the exchange rate and determine whether or not to proceed with the swap. You will send 1 ETH to a Kyber smart contract if you continue. Once received, the reserve will perform an on-chain exchange and credit your account with the token of your choosing. Kyber employs ETH as an intermediary when changing one ERC20 token to another. Token A -> ETH -> Token B is how it works. KNC is Kyber’s native token, and reserve holders must pay KNC for the opportunity to administer the reserves. Holders can also stake their KNC in the KyberDAO, which grants them governance rights and returns a staking reward. Furthermore, it enables bitcoin suppliers to accept a wide range of currencies while still being paid in their preferred currency. In these sorts of transactions, the Kyber Network acts as a service.
**Loopring – Layer 2 and Decentralized Exchange**
Loopring, while similar to Kyber, is distinct in this list in that it is a decentralized exchange protocol rather than a dex. This means that Loopring allows anyone to create a custodial order-book based exchange on Ethereum (or any other smart-contract platform), and Loopring then combines the pools on those exchanges into a single massive pool and matches orders across these separate exchanges built using Loopring’s structure and participating in the network. Furthermore, after you submit your purchase, your coins are yours until the order is performed. Your coins are not locked into the order book, and you may cancel or change your purchase whenever you choose. Miners, who are responsible for matching these orders, are reimbursed in LRC, and they are motivated with bigger incentives for discovering better exchange rates. Loopring is also notable for being a Layer Two solution. That is, all transactions and trades take place off chain, therefore trading costs are astronomically lower than Ethereum’s at peak periods, with the drawback being that it requires a little of extra understanding and the willingness to actually move your coin there.
**Decentralized Exchange – Balancer**
Balancer is an automated market maker similar to Uniswap in that users may contribute their cryptocurrency to liquidity pools to gain incentives, but it differs in that users can construct their own Liquidity Pools with up to eight assets pooled instead of just two. The weights of the underlying assets are arbitrarily defined by the pool’s developer and are automatically rebalanced as prices vary to maintain the weight. Anyone may now construct their own self-balancing index fund or invest in someone else’s. The disadvantage is that diverging loss is exacerbated since the values of the multiple assets might move more widely than with simply two assets offered at 1:1. It also opens up large arbitrage opportunities because there is no Oracle connectivity to bring in outside prices, thus the prices in the pools only change when someone trades. BAL is the protocol’s governance token, and as the protocol evolves, BAL holders will be able to “help lead the system to its maximum potential.” Balancer expressly mentions various aims, such as deploying the protocol on blockchains other than Ethereum, creating layer two solutions, and instituting fees at the transaction level.
7 thoughts on “A brief overview of some of the most used DeFi protocols Hello everyone, I’ve compiled a list of some of the most popular DeFi projects, along with a brief description of each:”
Can we have a link showing these are the most used defi platforms?
Edit:feels like you are writing this from 2019
Cool text with fantastic explanations. Wish that Nereus finance also be one day on your list. 🙂
Because of the massive increase in digital assets in recent years, the difficulties that asset management platforms like Yearn Finance, Fidelity, Unido, and Gemini are solving on a daily basis deserve to be recognized and applauded.
Missing bancor the original amm that Uniswap forked
I know perhaps most of these platforms but how sure are you they’re the most used? I could easily say its the ones I use and I didn’t see them on your list like pancake and quickswap and I think a lot of people use them. Its like saying cos I bought matic, Kaddex cos it dropped a couple of days ago and ftm that they’re the best tokens to buy but that will require me bringing evidence
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