The hype surrounding the emerging sector of decentralised finance is increasingly flattening out. Is the DeFi boom already over or is this the calm before the storm?
Many of the new Ethereum DeFi projects have fallen dramatically in recent weeks and some investors are looking for other investment opportunities. Nevertheless, some crypto experts believe that DeFi is only just beginning and that great things are yet to come.
DeFi hype already over?
Crypto analyst and trader Qiao Wang, for example, is convinced that the DeFi sector still has unimagined potential.
Qiao Wang and a few other crypto experts believe that the de fi sector will continue to grow enormously in the long term – but which projects are currently making the running in crypto space? In the following, we present the five largest Decentralized Finance projects after Coingecko.
5. Synthetix Network (SNX)
Synthetix is an ethereum-based protocol for the issuance and trading of synthetic assets. Each synthetic asset (Synths) is an ERC-20 token that represents the price of an external asset. Within the Synthetix platform, there is therefore a variety of ERC-20 tokens representing fiat currencies, crypto currencies, commodities, indices and stocks.
In principle, the system can represent any asset. Investors therefore have the opportunity to participate in price increases of assets without having to register with a broker. Investors also do not have to go through any know-your-customer processes and everyone is free to interact with the Synthetix protocol. Theoretically, even people without a bank account can participate in the global financial markets.
The native token SNX acts as a security that has to be deposited when creating synths. SNX can also be strengthened. Investors who stack SNX receive a part of the fees to settle transactions on the SNX platform.
The value of the SNX tokens is therefore directly related to the use of the DeFi project.
4. UMA (UMA)
UMA is a DeFi platform for financial contracts that aims to enable everyone to participate in the global financial market. The UMA protocol is similar to the Synthetix Network in its structure and functionality. Just like Synthetix, the UMA token can be used to create Synthetix assets. This makes it possible for each asset to be represented as an Ethereum token.
In addition, it is possible to create virtually any form of financial contract on UMA. Thus, for example, interest-paying synthetic tokens can be constructed on Ethereum. This function offers enormous potential for further innovations in the DeFi sector.
UMA is therefore a borderless platform when it comes to generating financial contracts with the help of Smart Contracts.
3. uniswap (UNI)
The decentralised exchange (DEX) UniSwap is the largest DEX in the entire crypto space. Any ERC-20 token can be traded on the platform without any hurdles. In addition, the governance token UNI gives Hodlern a say in the protocol development of Uniswap. Only a few weeks ago, there was a UNI-Airdrop, which rewarded all users of Uniswap with UNI-Tokens and promoted the decentralisation of the project.
Through this action, UNI protocol governance is already relatively decentralised compared to other pseudo-decentralised finance protocols. Furthermore, users can provide liquidity for trading pairs in so-called liquidity pools to earn a percentage of the trading fees. In addition, liquidity providers can earn UNI tokens in special liquidity pools.
2. makerDAO (MKR)
The MakerDAO DeFi protocol enables users to take out loans via a decentralised system. Only cryptocurrencies have to be deposited, for which one receives the Stable Coin DAI in return.
In simple terms, MakerDAO allows borrowers to pledge crypto assets for which they receive a loan, for example instead of a watch or a diamond ring. In addition, the lender is not a bank but a smart contract, also called Collateralised Debt Position (CDP). Only the borrower has the possibility to repay the loan.
The promise of the MakerDAO platform is therefore to give users the opportunity to obtain loans without KYC and without an external party. In addition, smart contracts are supposed to provide a relatively high level of security, as they automatically follow the fixed loan conditions.
MKR, the native token of the DeFi platform, is a kind of financial share of Maker DAO. The more the system is used, the more the value of the MKR tokens increases.
This is because when a loan is repaid, interest is incurred, which automatically triggers a repurchase of the corresponding amount in MKR. In addition, some of the MKR tokens are destroyed during the repayment process, which reduces the overall supply of the token and creates scarcity.
MKR owners can vote on the amount of interest that must be repaid and also on the further development of the MakerDAO protocol.
1. chainlink (LINK)
Chainlink is a decentralised oracle system. This means that Chainlink verifies data from the real world that is used in the context of Smart Contracts. Simply put, Chainlink aims to connect the real world with the digital world.
Data available to Smart Contracts in this context are, for example, asset prices or credit contract conditions. In theory, however, all things from the real world can be tracked digitally.
Compared to centralised oracles, which are easy to manipulate, Chainlink creates a decentralised alternative. Chainlink thus solves an enormously important problem for all block chain applications, because its decentralised nature makes it much more difficult to manipulate quote data, which can be essential for smart contracts.
In addition, Smart Contracts are better protected against price manipulation by external parties, as there is no central point of attack with a decentralised oracle.
The LINK token is an ERC-677 token, which has the functionality of an ERC-20 token and also enables token transfers that may contain important data. LINK also serves as a reward for node operators who ensure the retrieval of data for Smart Contracts.
Furthermore, node operators must deposit LINK tokens to create a node. As a result, it is possible that in the future a large number of Smart Contracts requiring real world data will increase the demand for the LINK token.