Decentralized finance boomed in 2020 and continues to grow just as steadily in 2021. The total blocked amount in the protocols has almost reached the milestone of $ 40 billion. We’ve compiled a top of seven DeFi projects that are considered the most promising by industry experts. The evaluation process takes into account the most capitalized protocols, as well as those that have an original idea that can change the future of finance.
Uniswap is an ERC-20 token exchange protocol running on the Ethereum blockchain. The decentralized nature of the project means that the developers do not charge commissions in their favor – all fees go to the community, thereby stimulating liquidity providers.
Unlike traditional exchanges, Uniswap operates without an order book. It uses an automated market maker mechanism that determines the exchange rate and price slippage. The three main types of users of the protocol are ordinary users who log in to make an exchange, liquidity providers who operate trading pools, and participants who supply information about external prices, earning on spreads between Uniswap and other markets.
Chainlink is a network of decentralized oracles, that is, channels for transmitting information from outside the blockchain directly to the chain. It can be used as a basis for many different protocols, for example, to receive price information or information about the results of any events. Provides tamper-proof inputs and outputs for complex smart contracts on any blockchain.
The LINK project token is of great importance – it is used by the owners of smart contracts to pay nodes for providing data. The more connections a node has, the more authoritative it is. This way, oracle providers are incentivized to keep as many links as possible in their nodes in order to generate more profit.
Kava is a decentralized lending platform with the ability to exchange cryptocurrencies between different blockchains. This gives the market additional flexibility. In this case, the sharing application works instantly. A wide variety of stablecoin loans are supported, and there is information that Bitcoin will be added soon.
To ensure that all loans are well secured, Kava uses a mechanism called a secured debt position. Provides masternodes and staking opportunities, and offers top 100 validator rewards. An autonomous coin burning system increases demand and leaves the native token deflationary.
Compound is an Ethereum-based software that allows borrowers to take out loans and lenders to lend by locking their crypto assets into the protocol. Interest rates (both paid and received by borrowers / lenders) are determined by the supply and demand of each individual asset.
Compound allows you to earn compound interest – that is, calculated not only on the original amount, but also on all interest received since then. Thus, the longer you hold onto your assets, the faster your income will grow.
Synthetix is a platform that allows users to speculate on the price of real assets such as various cryptocurrencies, fiat currencies, stocks and precious metals using ERC-20 tokens. These tokens, known as synthetic assets or “synths”, can track the prices of listed assets using the Chainlink oracle network mentioned above.
In order to receive synths, users must block Synthetic Network Tokens (SNX) as collateral, after which they can freely exchange any tokenized assets within the platform.
Yearn Finance became one of the most popular DeFi apps almost immediately after launching in July 2020. It is a profit aggregator that automatically redistributes user investment between different decentralized protocols based on where the best profit level is at the moment.
The YFI token rate is almost equal to the Bitcoin rate, which indicates a high demand among the crypto community. The platform is constantly expanding the range of products available to users. The main product for generating profitability is vaults, the vaults where assets are deposited.
Aave is another borrowing and lending protocol that runs on the Ethereum blockchain. It is similar to Compound and others in its essence, but it has an important feature that sets it apart from many competitors: instant flash credits. These are credits that are only valid for one blockchain transaction. Provided without collateral.
This was achieved thanks to the following mechanism: if the loan is not repaid on time, then the transaction is reversible. Assets for term loans are taken from the liquidity pools of smart contracts. Interest rates on flash loans are only 0.3%, which provides good arbitrage opportunities.
As DeFi continues to grow, decentralized protocols will inevitably spread further. They have clear advantages over the classical financial system: users have complete control over their funds, and commissions are also very low. It is easy to generate passive income with DApps, which is especially facilitated by liquidity aggregators such as Yearn Finance. The Blockchain Explorer company conducted research and concluded that by the end of 2025, the size was $ 210 billion.
Of course, there are also problems – for example, possible vulnerabilities in smart contracts. Only projects that have been audited by well-known audit companies should be chosen for use, this will reduce the risk of losing funds.