Choosing the Right DeFi Crypto Platform
The world of blockchain technology has grown to such an unthinkable scale that it is becoming increasingly difficult to ignore its impact on the global financial ecosystem. Due to its promise of full control and privacy over one’s assets, the decentralized finance (DeFi) market is an industry juggernaut when it comes to capitalization growth, with an estimated $200 billion currently locked in different DeFi protocols.
Seem overwhelming? Rightly so: the decentralization of assets is only the first step in what many believe to be the most sensible replacement for traditional, centralized financial systems that contemporary society operates on.
Since the surge of the DeFi market, it has become clear to many crypto investors that digital coins are best purchased and traded on trusted and reliable DApps (decentralized apps) and DEX (decentralized exchanges). Of course, not all DeFi platforms are made equal, especially considering the fact that new ones are popping up at a staggering rate. Therefore, before depositing your crypto anywhere, you will want to choose a reputable DeFi platform that has been around for some time and has a solid member base.
All that being said, here is our carefully curated list of the best DeFi platforms you can find today.
What is DeFi?
Decentralized finance is an umbrella term for different digital tools such as applications, add-ons, and services running on blockchain, i.e. smart contract technology. Smart contracts are pieces of code representing digital agreements that are executed automatically between two parties once certain preconditions are met.
DeFi and smart contracts go hand in hand as they provide the necessary transparency and blockchain visibility for crypto transactions to take place without any of the bothersome middlemen, expenses, and bureaucracy commonly associated with traditional contracting.
DeFi vs. CeFi
The significance of decentralized finance is rooted in the fact that its reach and usability have grown exponentially in just a few years since its introduction, and it is rapidly encroaching on the trading value of centralized finance systems.
As opposed to CeFi that subsists on tons of paperwork, commissions, intermediaries, and is generally extremely intrusive when it comes to the individual’s personal data, DeFi—like other crypto-related phenomena—operates on principles of anonymity and total control over one’s own digital assets.
Top DeFi Platforms
There are many great resources online on how to choose the best DeFi crypto platform, though the sheer wealth of articles, guides and recommendations might be intimidating to anyone but seasoned crypto investors.
With this challenge in mind, we set out to compile the following selection of five of the most widely-used platforms currently providing services on the decentralized finance market.
It is important to point out that none of these platforms differ fundamentally in terms of their functionalities; however, some key factors to consider are:
- the blockchain network that the platform is based on,
- liquidity and trading volumes, as these directly affect the outcome of transactions, and
- the community surrounding it.
PancakeSwap is the perfect way to kick-off our list given that it is leading the market as the most popular decentralized platform powered by the Binance Smart Chain network. With just about 3 million monthly users and a whopping $4.8 billion locked in its protocols, the platform is managed with the help of the DAO (Decentralized Autonomous Organization) community of CAKE token holders.
PancakeSwap offers lightning-fast transactions with negligible fees and high returns on your crypto stakes. The platform generously rewards users who add to its liquidity pool, and it also offers unique products for yield farming, staking, as well as plenty of usage opportunities for NFTs.
The PancakeSwap community recently announced that they would be limiting the issue of CAKE coins to 750 million, so you’d better not waste time if you want to get your foot in the door now.
Next in line we have UniSwap, an immensely popular decentralized crypto exchange protocol built on the Ethereum blockchain. UniSwap was one of the first DeFi projects to have ever launched way back in 2018, becoming the inspiration behind many other DeFi projects down the line, including PancakeSwap.
If you’re looking to trade Ethereum-based coins, Uniswap has them all on offer, along with an appealing rewards system. The biggest downside of this particular platform is its transaction or gas fees which are never under $30 and can go up to 50$ per action.
Despite these high gas fees, UniSwap is still spearheading the DeFi industry with $1.18 billion in daily trade volumes and a TVL (total value locked) of $4.02 billion.
We continue our selection with SushiSwap. Like UniSwap, SushiSwap is powered by the Ethereum blockchain, but it was actually developed on the basis of PancakeSwap’s core protocols and algorithms that have been significantly improved since Sushi’s launch in 2020.
In exchange for maintaining liquidity in Sushi’s pools, crypto holders get rewarded with protocol fees, as well as a portion of the platform’s daily issue of its native token SUSHI. There are many different assets available, with $95 million in intraday trading and $2 billion of locked funds. Over the past 30 days, the platform saw an increase in the number of its monthly users to 160 thousand, pointing to the great potential and relevance of the project.
Although both platforms are based on the Ethereum network, provide similar incentives for their users, and sound delicious to boot, keep in mind that SushiSwap and UniSwap have some core functionality differences.
MakerDAO is another Ethereum-based smart contract platform that allows you to issue DAI stablecoins against crypto assets.
In 2020, DAI had over 20x capitalization growth thanks to the DeFi hype, and MakerDAO subsequently became the first DeFi protocol with a TVL of $1 billion. In early 2021, amid the rapid growth of Ethereum, the total value of funds locked on smart contracts of the MakerDAO DeFi project reached $3.15 billion. The platform approached $9 billion in May of this year.
In true DeFi nature, the Maker Foundation recently announced that it has fulfilled its obligations with regard to developing the project, effectively transferring the right to make all strategic and operational decisions to the DAO community and making the platform fully decentralized.
We complete our list with Fantom. This smart contract platform gained its popularity due to ease of migration, high-speed and low-cost transactions, and an extensive range of dozens of blockchain projects, including decentralized exchanges, DeFi lending protocols, and NFT marketplaces.
In the fall of 2021, Fantom entered the top 10 blockchain platforms in terms of the volume of blocked funds, and the number of unique addresses in the network exceeded 1 million. In addition, the project launched its own USDB stablecoin a couple of months ago, and the developers also announced the TradFi Bonds project that promises a 21-32.5% annual yield in USDB as reported by TradeCrypto in March.
The main advantage of Fantom is its scalability and convenience for ecosystems of large projects. The explosive growth of the platform was made possible by two factors: the launch of cross-chain bridges for liquidity migration from the ETH and BSC networks, as well as the Fantom Foundation’s campaign to support and incentivize developers.
Keeping some of the abovementioned platforms and key features in mind should help you choose the right DeFi service to get started and get ahead with your investments.
Although the DeFi market is as saturated as ever, any crypto enthusiast can easily see its benefits, and the rapid development of new and exciting projects can only mean good news for all.
True enough, the industry is constantly finding new and better ways of expanding the DeFi ecosystem, which promotes its utility, improves security, and keeps the CeFi crowd on their toes!
Author: Sviatoslav Pinchuk
Man who simply bought some BTC for domestic needs in 2014 and then forgot about it till 2017. The dude who got Etherium in 2017 by misclick and sold it in 2018 “just to try”. Lost 1 Florida house in XEM in 2018, Sviatoslav finally decided to trade reasonably and now he is one of the most analytical and data-driven trader in Crypto Industry. Has Bachelor Degree of Chinese Interpreter and deep practical experience in competitive niches SEO.