Disclaimer: The text below is a press release that was not written by Our.
If you have been following blockchain, you have probably already heard of the recent emerging industry called DeFi (decentralized finance). Perhaps unsurprisingly, this market has experienced substantial growth and is now worth over $4 billion.
So, what exactly is DeFi and why is it important? In short, Decentralized finance (DeFi) is one of the latest innovations that has emerged out of the blockchain-powered, decentralized economy. It follows the idea of rebuilding the infrastructure of financial services and moving it onto decentralized networks to take the industry from a centralized system full of monopolies towards a trustless and transparent world that runs with no intermediaries. Primarily built on the Ethereum network, DeFi applications provide users with traditional financial services but in a decentralized, borderless manner that enables anyone across the globe with an internet connection to gain access to financial products and services.
This growth could not be at a weirder time. A pandemic has swept the world, and while the global economy is forced into a shutdown, the world of decentralized finance keeps being populated by new projects from teams across the globe. There are currently over 100 projects tackling various DeFi solutions.
Below, you will find the list of top five DeFi protocols to watch in 2020.
1. Anyswap
Anyswap is a fully decentralized cross-chain swap protocol, based on Fusion DCRM technology, with automated pricing and liquidity system. Anyswap enables swaps between any coins on any blockchain which uses ECDSA or EdDSA as a signature algorithm, including BTC, ETH, USDT, XRP, LTC, FSN, etc.
Why is Anyswap the top DeFi token to watch in 2020?
Anyswap is the first completely decentralized swap exchange that allows the user to swap any coin or token (ECDSA and EDDSA as signature algorithms – 98% of all blockchains) with one another, without any third party risk.
Anyswap was released in July, and has already over $6.58M USD in their pool. To make all this even better; they offer a 430% yearly yield rate. The ANY token issued is a governance token, which allows voting rights for holders to choose which coins will be listed next. No ICO, no fundraising, and no airdrop! Its price rose to $1.82 USD within the first two weeks of its release. If the project can go this far this fast, then the sky’s the limit for its future.
One of its most noticeable features is its low cost. Anyswap charges a low fee of only 0.4% for every swap transaction, among which 0.3% goes to liquidity providers and 0.1% goes to Anyswap Company.
Anyswap protocol also supports the following features:
- Decentralized Cross-Chain Bridge — Users can deposit any coins into the protocol and mint wrapped tokens in a decentralized way.
- Cross Chain Swaps — Users can immediately swap from one coin to another.
- Programmed Pricing and Liquidity — Liquidity providers could add and withdraw liquidity into swap pairs. The programmed pricing system is based on the liquidity provided.
2. MakerDAO
With over $1 billion in assets committed, Maker is by far one of the most recognized decentralized finance applications in the market. It has a market dominance of around 60%, and about $600 million worth of digital assets are currently locked in Maker protocol smart contracts.
What makes MakerDAO earn the position as one of the top DeFi projects?
The decentralized credit platform supports DAI, a stablecoin whose value is pegged to USD and one of the most used stablecoins in the cryptocurrency industry. Maker DAO allows anyone to open a vault, lock in crypto collateral, and generate DAI against that collateral. Unlike other dollar-pegged stablecoins, Dai does not hold dollars in a bank. Instead, the Maker protocol uses smart contracts and collateral in the form of ETH to maintain the price peg.
Dai can be used to lend (to earn interest), to make payments, to trade, or to invest in other Ethereum-based assets.
What sets MakerDAO apart from other projects is the manner they operate and are governed. Its governance and automation system leverages Ethereum smart contracts to perform lending and stabilization functions without a central identity.
The Maker Foundation is directing its efforts to prepare the voting community to govern the Maker protocol after decentralization. The three key elements of self-sustaining DAO (technical, human, and procedural) will enable the community to administer a full decentralized marker protocol taking care of every sphere of DAO.
It is reported that MakerDAO is voting on whether or not to extend the collateral that they currently accept for loans to real-world assets, and not just cryptocurrencies. This exciting proposal, if accepted, would be a major development for the space as a whole.
3. Synthetix
Synthetix is an Ethereum-powered decentralized investment platform that enables users to create and trade so-called “Synths,” which provide on-chain exposure to tokenized, synthetic versions of real-world assets. It allows users to bet on crypto assets, stocks, currencies, precious metals, and other assets in the form of ERC20 tokens. Trades take place on a peer-to-peer basis and on a non-custodial basis. Currently, Synthetix has over $140.6 million held in its liquidity pools.
Why is Synthetix one of the top DeFi projects?
Much of Synthetix’s recent success can be attributed to its innovative token incentive model. SNX holders stake SNX in return for fees from the Synthetix exchange and rewards from the system’s inflationary monetary policy. To create a new Synth, more than 750% of the value of the Synth must be staked as SNX. The more SNX staked and locked as collateral, the less is available in the market and the more valuable the token becomes. The proof is in the price. The SNX token made a dramatic rise in 2019 and is predicted to continue this success in 2020 as well.
Synthetix uses a multi-token infrastructure based on a system of collateral, staking, inflation, and fees. The system uses two types of tokens – the main Synthetix Network Token (SNX) and Synths. The system is similar to MakerDAO’s where ETH is locked up to create DAI; In Synthetix, SNX is locked up to create sUSD (synthetic USD). The sUSD acts as debt while SNX acts as the collateral. SNX is staked as collateral to potentially create any synthetic asset – not just sUSD.
One of the core requirements of the Synthetix system is the ability to get accurate information from the outside world, such as the price of the Japanese Yen – and eventually the price of stocks like Tesla. Synthetix has partnered with ChainLink to reliably bring information to the blockchain without needing to trust a central party – very DeFi.
Synthetix began 2020 by demonstrating the “money lego” properties of DeFi by integrating the sUSD stablecoin with the margin trading platform bZx. But the big feature most have been waiting for is the ability to trade stocks like Tesla and Apple on top of Ethereum – an absolute game-changer for DeFi believers everywhere.
4. dYdX
dYdX is an Ethereum-powered non-custodial trading platform that enables crypto traders to go long and short digital assets on margin. Currently, traders can trade ETH using the stablecoins DAI or USDC with up to 5x leverage. Additionally, it enables users to borrow and lend crypto. Lenders can earn up to 5.10%, while borrowers can pay as little as 0.51% interest p.a. (depending on the asset). Over $19.4 million of Ethereum-based tokens are currently locked up in the dYdX protocol.
Why is dYdX included in the list of top DeFi projects?
As a pure trading platform, dYdX is quite limited, but as a completely open, and non-custodial financial protocol, it is one of the most advanced. It is a trustless trade service with minimum risk from a counterparty. It is non-custodial, so the user keeps control over the assets. The platform provides instant access with no sign-up. It uses the Ethereum Blockchain for smart contracts and security.
Its features are currently limited to basic trading between three simple assets (ETH, DAI, and USDC), lending assets to collect interest, and two types of margin trading: isolated margin trading and cross margin trading. Though these are simple tools for the veteran trader, they are a huge leap forward for the fledgling DeFi ecosystem.
As opposed to the margin trading, lending on dYdX is considered low risk and passive. With dYdX, lenders automatically earn interest each time a new block is mined. Any funds deposited on the platform will continuously earn interest at every block and can be withdrawn at any time with no minimum requirements. Because all loans are collateralized and face the threat of liquidation, the lender will always be repaid.
5. Uniswap
Uniswap is a decentralized exchange protocol that enables users to convert Ethereum-based ERC20 tokens on-chain in a private, secure and non-custodial manner via an extremely easy-to-use user interface. Instead of using order books, Uniswap makes use of so-called liquidity pools that help to boost the protocol’s exchange liquidity.
Why do we think Uniswap is one of the top DeFi projects this year?
Uniswap is one of the driving forces behind the current DeFi bull run. Acting as a fully decentralized exchange, Uniswap differs from other DEX’s as it leverages incentivized liquidity pools instead of order books. Users that decide to provide liquidity are rewarded with a percentage of the fees incurred on each Ethereum powered transaction.
Currently, Uniswap has over $100m locked in liquidity pools and hundreds of new listings per week. For novice cryptocurrency users, there is a learning curve to using Uniswap as it functions off of external ERC-20 wallets that are connected and used to trade assets and provide liquidity. There are also considerations around slippage and volatility that should be studied prior to using Uniswap.
Uniswap is going places, and the project’s stats are the proof. On August 10th, 2020, Uniswap powered $250 million in daily trading volume, making it the protocol to beat in Ethereum’s blooming DEX scene right now. Uniswap’s great trading UI and cryptonative earning opportunities combined with the protocol’s proven track record make it one of the top DeFi projects. As such, it’s well poised to be a dominant project for years to come.
Conclusion
DeFi is believed to be the future of the Financial Services industry; however, there is still a long way to go. The freedom from the monetary control of centralized institutions is the ultimate vision of this movement. In the long run, the institutions and FinTech innovators must look to collaborate to efficiently build on traditional markets while leveraging the innovations in DeFi.
Without a doubt, there are a plethora of promising and exciting DeFi projects out there that will gradually grab the spotlight they deserve, but for now, we believe that the above five are likely to stand out above the rest and have enormous potential.
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