DeFi (decentralized finance) is one of the most recent innovations that has appeared from the blockchain-supported, decentralized economy. Initially developed on the Ethereum network, DeFi applications offer users traditional financial services but in a decentralized, limitless way that enables anyone across the world with an Internet connection to access financial products and services.
Now, DeFi users can borrow, lend, trade, invest, and make payments without needing to appeal to a financial institution as an intermediary. Rather, the role of financial institutions is taken on by decentralized smart contract protocols.
It is no wonder that the DeFi market has seen substantial growth and is now a $1 billion market, as measured by the amount of token staked in DeFi protocols. Because of the growing popularity of the platform, we decided to create a short and comprehending list of the top five best Ethereum-powered DeFi protocols you can use today.
Top Five DeFi DApps
The DeFi protocols in our list are ranked by the dollar amount locked up in each market’s smart contracts. To compose our list of top DeFi platforms, we used data collected by DeFi analytics provider DeFi Pulse.
Maker is by far the most popular and important decentralized finance application in the market. With a DeFi market dominance of approximately $600 million worth of digital assets currently locked in Marker protocol smart contracts, it’s not surprising to see it in the top.
The MakerDAO is a decentralized lending protocol that employs Collateralized Debt Position (CDP) in order to create the stablecoin Dai (DAI), which has its price pinned against the U.S. dollar. Dai is created when users deposit ether (ETH) as collateral in CDPs.
Dai is the only decentralized, stable digital currency that people can use without limitations. Dissimilar to other dollar-pegged stablecoins, it doesn’t hold dollars in a bank; rather, the Maker protocol uses smart contracts and collateral as ETH to keep the price peg. Dai can be used to lend, make payments, trade, or invest in other Ethereum-based assets.
Synthetix is another Ethereum-powered decentralized investment platform that allows users to create and trade Synths, which offer on-chain exposure to tokenized, synthetic versions of real-world assets.
Initially named Havven, Synthetix enables Ethereum users to invest in artificial assets that can represent gold, Bitcoin, dollars, Tesla stock, and many other assets. Trades are carried out on a peer-to-peer basis and on a non-custodial basis.
At the time of press, Synthetix has over $140.6 million locked in its liquidity pools.
InstaDApp is a ‘trustless smart wallet for decentralized finance.’ It is an app that allows DeFi users to ‘seamlessly manage, optimize, and deploy their assets to get the best returns across protocols.’
InstaDApp features a user-friendly dashboard that enables people to manage their DeFi investments on multiple protocols, including Maker, Uniswap, and Compound. For new DeFi users, this application provides an amazing starting point.
At the moment, more than $80.7 million are held in InstaDApp smart contracts.
Uniswap is a decentralized exchange protocol that makes it possible for users to convert Ethereum-based ERC20 tokens on-chain in a private, secure, and non-custodial way through an incredibly easy-to-use interface. Rather than using other books, Uniswap employs liquidity pools that help increase the protocol’s exchange liquidity.
The application is now considered as one of the most popular decentralized exchanges for Ethereum tokens. More than $59.5 million worth of Ethereum tokens is currently locked in Uniswap liquidity pools.
bZx is an open finance protocol developed on the Ethereum blockchain that allows users to borrow, lend, and trade digital assets. Ethereum users can gain interest for lending through the protocol, and borrowers can borrow at great rates, which are set by supply and demand.
Margin traders, for instance, can take advantage of the platform by paying lower margin lending rates than on centralized exchanges. The protocol currently holds more than $12.4 million in its smart contracts.
The fast-growing DeFi market is a statement to the financial innovations that are appearing from the blockchain industry. If the current DeFi growth rate continues, we could witness decentralized, borderless, open finance solutions replacing most of the functions that today’s centralized financial institutions are providing to their users.