Over the past few years, cryptocurrency investors have increasingly taken up decentralized finance (DeFi) as the go-to ecosystem to manage finances and earn interest. According to DeFi Pulse, the DeFi ecosystem stands at $69.05 billion, as of writing, representing a 650% boost over the past three years. However, many investors still find it difficult to pick out winners amongst the currency projects.
In this piece, we focus on some of the top decentralized finance projects you should look at as we head into the business end of the year. We focused on platforms that offer unique features, protect users’ funds, offer high earnings, and are available on multiple blockchain networks.
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What is decentralized finance (DeFi)?
Before listing some of the best DeFi platforms, let’s understand why DeFi is experiencing sublime growth rates and adoption rates in crypto. The goals and opportunities offered in DeFi are endless but simple. First, DeFi products completely ditch paperwork as they are smart contract-based and digitally process transactions on the blockchain. This reduces the time consumed in making trades and transactions, unlike the traditional finance world.
Secondly, these platforms also provide a peer-to-peer model, cutting out middlemen and banks. Automating the contract process on the blockchain takes away the need for human intermediaries, eliminating the need to engage outside mediators, like lawyers, to process agreements between parties. This greatly reduces the cost of transactions.
Finally, DeFi opens up the financial system for any investor to take part. The ecosystem equalizes financial opportunities, which have traditionally been ‘reserved’ or major financial institutions like hedge funds and banks. DeFi is closing the gap between the individual and the financial oligarchy.
Top DeFi products to watch out for in 2022
For investors curious to try out DeFi products, it could be a challenge to find the right fit for them. Luckily, we have searched through the complex web of DeFi products and selected the top DeFi projects that should catch your attention in 2022. Check out the list below.
Bancor boasts as the earliest automated market maker (AMM) platform following its launch back in 2017. While over the years Bancor’s dominance in the DeFi market has diminished, the platform is planning a comeback with the launch of its Bancor 3 upgrade, expected to minimize the cases of impermanent loss and reduce the cost of transactions on DEXs.
According to the team, Bancor minimizes IL via its single-asset pools. However, these single asset pools needed two transactions to allow investors to stake their tokens in a liquidity pool. For instance, an investor wanting to swap WBTC to ETH will need to first convert WBTC to its native $BNT token, then $BNT is converted to ETH. With Bancor 3, investors will be able to complete this swap in one transaction, greatly reducing the gas fees.
Additionally, Bancor 3 introduces auto-compounding, a dual-reward system, multiple blockchain connections, and 100% protection from impermanent loss.
Launched in 2017 as ETHLend, AAVE has grown into the fourth-largest DeFi platform with $9.16 billion in total value locked (TVL). Aave (AAVE) is an open-source-based and non-custodial protocol that allows users to earn interest on deposits and even borrow cryptocurrency assets.
The key to its growth prospects lies in the platform’s finite supply and the generated fees from the lending/borrowing are used to buy back AAVE and burn it, which effectively reduces the supply.
One of the DeFi projects witnessing wild growth in 2022 is Liquid Driver, a yield farming aggregator on Fantom blockchain. With over 25,000 users on the platform and $250 million in TVL since its launch in August 2021, Liquid Driver could shake the DeFi ecosystem in 2022. The platform aggregates yield farms and liquidity pools on Spookyswap, Spiritswap, BeethovenX, and MagicX, offering yields as high as 130% APY.
The rewards are paid out in their native $LQDR token, which has experienced magnanimous growth since the turn of the year. On January 1, 2022, $LQDR traded at $10, reaching an all-time high price of $55 on January 17. The coin currently trades at $20.73 with a total market capitalization of $30.6 million, according to Coingecko.
Honorable mention: Terra Money
On March 1, 2022, Terra Money, better known as $LUNA, was the seventh-largest cryptocurrency (highest ranking at the time) with a total market cap of $33.1 billion. The network offers users an open-source blockchain platform for algorithmic stablecoins, that are pegged against traditional fiat. The platform burns $LUNA as demand for its native stablecoin $UST grows.