Which DeFi apps will take the world by storm in 2022? Let us find out!
DeFi (Decentralized Finance) is one of the most prominent movements in the blockchain sector, and many predict it will eventually supplant traditional finance. While the present financial system is based on a centralized platform managed by government agencies and other middlemen, DeFi functions on a decentralized network powered by blockchain.
DeFi’s widespread popularity became clear in 2021, when DeFi investments topped $100 billion. According to experts, this growth will be exponential as a result of DeFi financial goods such as efficient stablecoin trading, DeFi loan or Yield Farming, DEX (Decentralized exchanges), and DeFi insurance.
Continue reading to learn everything there is to know about the DeFi ecosystem, prominent DeFi protocols, and the top five DeFi apps in 2022 that allow users to lend, borrow, trade, and invest their crypto assets.
Let’s get started!
Top 5 DeFi Apps of 2022
Let’s take a look at the greatest DApps that have withstood the test of time, have a significant user base, and offer other benefits. The first factor considered by most rankings is TVL, or total value locked (TVL). However, this might be misleading because many DeFi initiatives raise a lot of money rapidly, only to have their customers forsake the platform in favor of another.
TVL refers to the total value of assets locked within these DApps in digital currency – the bigger the value locked up in a DApp, the better. The entire value locked within a DApp can be utilized to forecast the state of the yield farming environment.
However, TVL is not the only significant characteristic of a DeFi software to examine; you need also analyze the platform’s lifespan and how it sustains its customers.
Here are some DeFi applications that have withstood the test of time.
1. AAVE
Performance Score: 9.5/10
Total Value Locked: $11 billion
Pros
- There is a massive lending pool available for diverse digital assets.
- More features for digital asset lenders and borrowers.
- Some digital currencies have stable interest rates.
- Users can obtain flash loans after completing KYC registration.
Cons
- Complex and difficult to use.
- There are little incentives for lenders and borrowers to use the site.
- The possibility of flash loans is vulnerable to hacker manipulation.
General Information
- Aave was founded in 2017 by Stani Kulechov
- It was previously known as ETHLend.
- Aave is built on the Ethereum blockchain.
- The Aave Twitter community has 408,000 followers.
Key Features
- Collateralized infinite loans with zero borrow interest rates
- Flash loans or non-collateralized loans with a set interest rate of 0.09%
- Access loans in various virtual currencies
- Flexible interest rates for borrowers
Why We Recommend: Aave is an excellent protocol for advanced users, with unique features and usefulness. Because of its quick and simple loan process, it’s a fantastic solution for anybody interested in crypto-based borrowing and lending.
2. MAKER
Performance Score: 9.0/10
Total Value Locked: $17 billion
Pros
- Maker is presently used by over 400 applications and exchanges.
- Maker’s token DAI is stable because it is tethered to the US dollar.
- It runs a system that is open and transparent.
- By storing your assets in Maker’s DAI, you can receive interest or DAI Savings Rate (DSR).
- It provides stability, adaptability, and security.
Cons
It is vulnerable to malicious hack assaults on smart-contract infrastructure.
General Information
- Maker was founded by Rune Christensen in 2015, although it was not accessible for usage until 2018.
- Maker is built on the Ethereum blockchain.
- Maker DApp provides lending/borrowing services and trading stability.
- MakerDAO provides two cryptocurrencies: DAI and MKR.
- The DAI stablecoin is pegged to the USD, while the MKR token is used to pay users interest. Maker is mostly used for lending the stablecoin DAI. Users deposit supported ETH into the Maker Vault, resulting in a loan reflected in DAI that can earn interest.
Why We Recommend: MakerDAO’s tokens, DAI and MKR, work together to provide considerable benefits and revenue to investors. MakerDAO allows token holders to collateralize a variety of digital asset holdings in exchange for stablecoin loans paid in DAI and controlled using a system known as “Collateralized Debt Positions” (CDPs).
3. Curve Finance
Performance Score: 9.0/10
Total Value Locked: $14 billion
Pros
- Low transaction costs.
- Curve can prevent price disparities between crypto pairs by allowing for new forms of bonding curves.
- Reduced chance of temporary loss. Curve’s liquidity brokers provide stablecoin pairings that minimize temporary loss.
Cons
- Because of its complexity, most investors shun Curve’s token.
- Separate DeFi technologies pose a risk. Curve Finance interfaces with different DeFi protocols, rendering the system susceptible to problems caused by a separate DeFi system.
- Liquidity returns fluctuate a lot. Liquidity pools with a high annual percentage yield (APY) can frequently fall to a low APY over time.
General Information
Michael Egorov started Curve Finance. Curve Finance DAO’s ERC-20 token, CRV, is a governance token. Curve Finance has 251,000 Twitter followers. Curve is a Decentralized Exchange as well as a DeFi financing platform.
Vote-escrowed CRV (veCRV) is a word for CRV that has been secured into the Curve protocol for a fixed amount of time. veCRV owners frequently profit from transaction fees. A deposit reward may be granted if you deposit the coin with the smallest ownership in a liquidity pool.
Why We Recommend: Compared to other DEXs, Curve offers a borrowing mechanism with minimal volatility. Curve Finance also compensates users that contribute liquidity to the market. Liquidity pools do not connect buyers and sellers to complete an exchange, and so, the transaction process is a lot more efficient.
4. UniSwap
Performance Score: 8.5/10
Total Value Locked: $8 billion
Pros
- It is possible to exchange a wide variety of ERC-20 tokens.
- Straightforward and simple to use.
- Complete transparency and open-source code
- Staking your digital currency allows you to gain rewards.
- All you need to get started is your crypto wallet.
- Registration for KYC and other personal information is not necessary to open an account.
Cons
- Uniswap does not accept fiat cash for transactions.
- Fees for Ethereum Uniswap runs on Ethereum, which has significant gas (transaction) fees as of May 2021.
- When investing in Uniswap, investors frequently suffer temporary losses.
General Information
- Hayden Adams is the founder of Uniswap, which operates as a decentralized exchange platform (DEX). Uniswap was established in 2018.
- Uniswap’s Twitter community has 718,000 followers.
Key Features
- UNI, Uniswaps’ original coin, is a governance token, allowing owners to vote on how the network is administered. Customers can profit by contributing liquidity through Uniswap’s Pool.
Why We Recommend It: Uniswap offers a wide range of services and functionality, as well as the ability to trade tokens via the DEX. Through Uniswap’s liquidity pools, you may also earn income on your crypto assets.
5. Compound
Performance Score: 8.0/10
Total Value Locked: $8 billion
Pros
- Interest rates are higher when compared to traditional financial institutions.
- To utilize the site, you do not require AML, KYC, or a credit score.
- Customers are rewarded with Compound (COMP) tokens.
- There are no limitations to using the asset pool several times.
- It is a Community-governed Decentralized Autonomous Organization.
Cons
- A restricted amount of cryptocurrencies are available for borrowing or lending.
- The DeFi system suffers from technological issues as a result of a highly volatile algorithm-based smart contract technology.
- Yield Farming can be hazardous because individuals can exchange crypto for considerably more than the amount they have put down.
General Information
- Robert Leshner is the founder of the Compound protocol, which was introduced in 2018. The DApp provides a stablecoin and a platform.
- There are about 213,000 followers in Compound’s Twitter network.
Key Features
- The Compound smart contract reserves 10% of interest payments, with the remaining funds going to providers.
- cTokens are financial commodity representations that generate interest and act as security for supplied asset amounts.
- Customers can borrow between 50% and 75% of the price of their cTokens based on the asset class value.
Why We Recommend It: Compound has played an important role in upgrading the outdated finance system by utilizing smart contract technology, which is one of the most user-friendly, secure, and open DeFi technologies available. The number of crypto-assets supported may increase over time.
Conclusion
DeFi is one of the most significant blockchain developments, transforming global banking. Now is the moment to look for ways to profit from DeFi. In what ways might DeFi apps be used?
Borrowing and lending are two of the most prominent use cases for DeFi apps, but there are many more complicated possibilities available, such as being a liquidity provider for a decentralized exchange. You can earn interest by depositing your crypto assets in DeFi platforms such as Aave or Compound, which offer an Annual Percentage Yield.
You can participate in liquidity mining and be compensated for supplying liquidity (capital) to a DEX liquidity pool (Decentralized Exchange).
DEXs can also be used for trading. Unlike centralized exchanges, DEXs let users to conduct peer-to-peer transactions with one another, allowing them to trade smaller altcoins that are not listed on centralized exchanges.
It’s been fantastic to witness the popularity of DeFi projects skyrocket. DeFi is an exciting area to follow, with new decentralized financial services introduced on a weekly basis.
