Decentralized finance (DeFi) is one of the latest innovations that has emerged out of the blockchain-powered, decentralized economy.
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.
Today, DeFi users can borrow, lend, trade, invest, and make payments without the need for a financial institution as an intermediary. Instead, the role of financial institutions is replaced by decentralized smart contract protocols.
Perhaps unsurprisingly, the DeFi market has experienced substantial growth and is now a $1 billion market (measured by the amount of token locked up in DeFi protocols.)
Top DeFi DApps
Below, you will find the top ten Ethereum-powered DeFi protocols that you can use today ranked by the dollar amount locked up in each platform’s smart contracts.
We have used data from DeFi analytics provider DeFi Pulse to compose our list of top DeFi platforms.
Maker is by far the most significant decentralized finance application in the market. With a DeFi market dominance of around 60 percent, about $600 million worth of digital assets is currently locked in Maker protocol smart contracts.
The MakerDAO is a decentralized lending protocol that makes use of Collateralized Debt Position (CDP) to create the stablecoin Dai (DAI), which has its value pegged against the US dollar. Dai is generated when users deposit ether (ETH) as collateral in CDPs.
Dai is the only decentralized, stable digital currency that anyone can use without limitations. Unlike other dollar-pegged stablecoins, it 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.
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.
Originally called Havven, Synthetic enables Ethereum users to invest in synthetic assets that can represent gold, bitcoin, dollars, or Tesla stock, among other assets. 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.
Compound is a decentralized, algorithmic money markets protocol that enables digital asset holders to borrow and lend crypto against collateral. By adding digital assets into the Compound, liquidity pool crypto holders can earn interest, which adjusts automatically in relation to supply and demand.
The Compound protocol currently has over $128.4 million locked up in its liquidity pools and has emerged as one of the most popular decentralized lending platforms today.
InstaDApp refers to itself as a trustless smart wallet for decentralized finance. It is an application that enables DeFi users to “seamlessly manage, optimize, and deploy your assets to get the best returns across protocols.”
InstaDApp provides a user-friendly dashboard that allows users to manage their DeFi investments across protocols such as Maker, Uniswap, and Compound. For new DeFi users, InstaDApp provides a great starting point.
Currently, over $80.7 million are locked up in InstaDApp smart contracts.
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.
Unsurprisingly, Uniswap emerged as one of the most popular decentralized exchanges for Ethereum tokens today.
$59.5 million worth of Ethereum tokens is currently held in Uniswap liquidity pools.
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.
bZx is an open finance protocol built on top of the Ethereum blockchain that enables users to borrow, lend, and trade digital assets. Ethereum users can earn interest for lending via the protocol, while borrowers can borrow at reasonable rates, which are set by supply and demand. Margin traders, for example, can benefit from the platform by paying lower margin lending rates than on centralized exchanges.
Over $12.4 million in tokens are currently held in bZx smart contracts.
The Bancor Network is a decentralized exchange protocol that enables users to convert digital tokens between each other as opposed to having to go through a centralized trading platform.
Bancor runs on top of the Ethereum blockchain and uses smart contracts to enable the non-custodial trading of digital assets. The main aim of Bancor is to create liquidity for digital tokens through the use of what it calls Smart Tokens.
Currently, more than $11.3 million of cryptoassets are locked in the Bancor protocol.
WBTC stands for Wrapped Bitcoin and is a tokenized version of Bitcoin on the Ethereum blockchain. It is an ERC20 token that is backed 1:1 by bitcoin.
Its raison d’être is to enable Ethereum users to buy, hold, and trade bitcoin within the Ethereum ecosystem. Additionally, it enables users to use bitcoin in smart contracts in an easy-to-use manner that is interoperable with all Ethereum-based applications.
Over $6.8 million are currently locked in WBTC smart contracts.
Set Protocol is an Ethereum-powered open finance protocol that enables crypto investors to create and/or buy Strategy Enabled Tokens (or Sets), which are algorithmically structured baskets of digital assets that are based on a range of criteria, strategies, parameters, and asset weightings. Each Set is represented by a tradable ERC20 token.
At the time of writing, over $4.6 million worth of digital assets were locked in Sets.
The fast-growing DeFi market is a testament to the financial innovations that are emerging from the blockchain industry. Should the current DeFi growth rate continue, we could see decentralized, borderless, open finance solutions replace many of the function’s that today’s centralized financial institutions are offering.