Table of Contents
What is DeFi in simple terms?
Decentralized finance (DeFi) emerges as a nascent framework for structuring and facilitating cryptocurrency-based transactions, exchanges, and financial services. Central to DeFi is the fundamental principle that operational control and governance lack a centralized authority, fostering a landscape driven by decentralization.
Is DeFi high risk?
Within the DeFi realm, the prevalence of faulty smart contracts stands as a notable risk. This susceptibility arises from the potential for malicious entities to exploit inadequately coded smart contracts, targeting users’ funds for illicit gains. A significant portion of decentralized exchanges operate by facilitating trade through liquidity pools. Typically, these pools involve the locking of two cryptocurrencies within a smart contract.
What is DeFi vs NFT?
An NFT (Non-Fungible Token) is a distinct data entity stored on the blockchain, non-interchangeable in nature. DeFi revolutionizes financial instruments by bypassing intermediaries like exchanges and banks. NFTs serve a purpose by delivering value-added functionalities, facilitating asset tokenization, and safeguarding unique and specific attributes.
Best DeFi projects for investments 2023-2024
Here we list the TOP DeFi development solutions that could take center stage in 2023 – 2024 with their novel features and user-focused functionalities.
1. Ethereum ($ETH)
Ethereum stands out as the premier DeFi investment choice in 2023 due to its fundamental role as the foundational blockchain platform for a vast array of DeFi protocols. This underscores that numerous DeFi initiatives are constructed upon and function within the Ethereum ecosystem, with its native token, Ether (ETH), serving as the conduit for transactions and value transfer.
As the DeFi landscape and the utilization of its protocols continue to expand, the demand for Ethereum and its native token, Ether, is projected to surge. This is primarily because Ethereum is essential for covering network transaction fees (gas) required for engaging with DeFi platforms. Consequently, the process of burning ETH tokens ensues, leading to a diminished Ether supply that has the potential to spur swift price escalation.
2. Uniswap ($UNI)
Uniswap emerges as the preeminent decentralized finance (DeFi) exchange, accessible across Ethereum, Polygon, Arbitrum, Optimism, and other Layer 2 networks. With daily trading volumes exceeding $1 billion, the UNI V3 DEX stands as one of the most profitable DeFi applications. Furthermore, the platform’s expansion encompasses an NFT Marketplace, poised to rival OpenSea and LooksRare.
At the core of Uniswap lies the UNI token, an ERC-20 asset that opens doors to an extensive array of DeFi services within the platform, encompassing liquidity mining, governance, and insurance. Beyond these utilities, UNI token holders gain voting privileges influencing Uniswap’s future trajectory, while a forthcoming provision of revenue sharing enhances its appeal.
3. AAVE ($AAVE)
AAVE takes the lead as the largest multi-chain money market, offering users the ability to non-custodially lend and borrow an extensive spectrum of cryptocurrencies. With a substantial total value locked (TVL) exceeding $6 billion, the platform presents an array of DeFi services, including high-yield savings, flash loans, and tokenized real-world assets.
An added benefit of AAVE lies in its native $AAVE token staking option, providing users with an opportunity to stake their tokens and secure an 8% APY. Notably, their lending and borrowing protocol spans Ethereum, Avalanche, Polygon, Arbitrum, and other prominent networks, ensuring widespread accessibility.
4. Frax Finance ($FRAX)
Frax Finance stands as an extensive DeFi solution offering a diverse range of services. Anchored by an AMM-based swapping protocol, a lending application, a token transfer protocol, and a collection of stablecoins, it accommodates cryptocurrencies from eight major blockchains, culminating in a noteworthy Total Value Locked (TVL) nearing US$830 million, as per DeFiLlama records.
Esteemed in the DeFi realm, the platform distinguishes itself with unique propositions and the integration of stablecoins ($FRAX, $FPI, and $frxETH). Mirroring typical DeFi practices, Frax Finance introduces governance tokens ($FXS and $FPIS) that play a role in overseeing the ecosystem that revolves around its stablecoin offerings.
5. Morpho ($MORPHO)
Morpho distinguishes itself as a P2P lending DeFi solution that stands out for its commitment to on-chain operations. Leveraging peer-to-peer matching, the platform optimizes Annual Percentage Yield (APY) rates for both borrowers and lenders. Instant liquidity is ensured through pools, enabling crypto users to access borrowing opportunities around the clock.
Underpinning Morpho’s operations are meticulously scrutinized smart contracts, audited by globally acclaimed cybersecurity firms. This guarantees transactions are executed with utmost security and decentralization. Going a step further, the platform adopts a DAO-based governance system, offering users an avenue to actively partake in decision-making processes. Notably, DeFiLlama indicates a substantial Total Value Locked (TVL) surpassing US$336 million within the platform.
6. GMX ($GMX)
GMX stands as a versatile multi-chain derivatives platform across Avalanche, Arbitrum, and BNB Chain, enabling users to engage in futures, perpetual contracts, and options trading with leverage of up to 25x. Bolstered by a robust Total Value Locked (TVL) surpassing $400 million, the platform offers an extensive selection of over 20 trading pairs, encompassing cryptocurrencies like Bitcoin, Ethereum, Solana, Cosmos (ATOM), Uniswap, Chainlink (LINK), and more.
Distinguished by its status as one of the prime investment options in 2023, the GMX platform attains prominence due to its position as the 3rd highest fee-earning cryptocurrency or blockchain in the field, even including Layer 1 networks like Bitcoin. Elevated fees stem from the substantial trading volume on the platform, resulting in staking rewards exceeding 30% APY for GMX stakers, disbursed on a daily basis.
7. Nexus Mutual ($NXM)
Nexus Mutual emerges as a prominent DeFi insurance platform, garnering attention as a prospective force in light of the escalating significance of insurance within the cryptocurrency sphere. Providing comprehensive coverage for various risks, the platform leverages on-chain safeguards to empower investors. Its array of cover products includes Protocol Cover, ETH Slashing Cover, Excess Cover, and Covered Vaults.
Further enhancing its appeal, Nexus Mutual is actively developing additional products, poised for a 2024 launch. Reinforcing its credibility, the platform boasts certified audits conducted by distinguished cybersecurity firms, ensuring the solidity of its smart contracts. Impressively, the Ethereum-based crypto insurance platform hosts a substantial Total Value Locked (TVL) amounting to nearly US$275 million.
8. Lido Finance ($LDO)
Lido Finance ($LDO) represents a liquid staking derivative, extending its influence across Ethereum, Solana, and Polygon. This innovation empowers users to accrue yield on their staked assets without committing their capital over extended periods. Notably, Lido stands as the DeFi domain’s largest protocol, boasting an impressive Total Value Locked (TVL) that exceeds $8 billion, encompassing a substantial array of assets.
At the heart of the Lido protocol lies the ability for users to harness the potential of their staked coins without necessitating their sale. This is achieved by effectively encapsulating the asset and introducing a derivative that is collateralized by the underlying asset. The outcome is a flexible solution that permits users to access their funds as required, all the while earning yield during the waiting period.
9. ParaSpace
ParaSpace is a decentralized lending protocol that introduces a unique dimension by extending liquidity provisions to NFTs. Notable from its inception for pioneering this feature, the platform operates on the Ethereum network while harboring ambitions to expand onto EVM-compatible chains in the foreseeable future.
ParaSpace’s application encompasses the capability for users to bid on and acquire NFTs using credits acquired from platforms such as OpenSea and LooksRare. Additionally, the platform offers insurance coverage, including airdrop protection, elements designed to appeal to the wider Web3 audience. With an impressive accumulation of over US$103 million locked in crypto assets, ParaSpace emerges as a compelling contender to watch in the years 2023 and 2024.
10. Gamma ($GAMMA)
Gamma is a dynamic DeFi development solution, embodying the role of an automated concentrated liquidity manager. This innovative platform drew inspiration from Uniswap V3, incorporating the same feature to amplify liquidity for cryptocurrencies across customized price bands. Integral to its operation are specialized non-custodial position manager contracts termed Vaults, strategically overseeing liquidity pools. These adaptable contracts exhibit compatibility with various blockchains and DEXs, rendering them highly versatile.
Gamma’s vaults deploy a range of strategies encompassing dynamic range, stable, pegged price, delta hedging, gamma hedging, momentum hedging, and pairs trading. By harnessing these tactics, users can optimize their earnings via liquidity fees while mitigating the impact of impermanent loss. Impressively, DeFiLlama data reflects a substantial accumulation of assets, with over US$86 million locked within the platform.
How big will DeFi be by 2030?
Anticipated to witness remarkable expansion, the worldwide decentralized finance (DeFi) market is projected to attain a value of $232.20 billion by 2030’s closure, showcasing substantial growth from its estimated value of $11.96 billion in 2021. This market report serves as a significant compass, offering insights into the drivers, impediments, hurdles, and prospects within the global landscape.
Does DeFi have a future?
Moving forward, a surge of novel DeFi tokens is on the horizon, with numerous cryptocurrency exchanges poised to include them in their listings. Among DeFi’s most prominent applications, crypto lending stands out. As time progresses, DeFi is set to establish a fortified ecosystem for streamlined asset-centric crypto lending, fostering a swifter and more straightforward process compared to the present landscape.
What is DeFi 2025?
DeFi seeks to monetize blockchain gaming. Projected to reach around $256 billion by 2025, the gaming realm’s growth is evident. As players and creators invest significant time in this form of amusement, the desire to extract more value from the industry intensifies. A strategy embraced by developers to achieve this monetization is through the avenue of blockchain gaming.
Featured image was taken from Binance.Academy
