The word DeFi, decentralized finance, which we have heard frequently since 2020, is gaining popularity day by day. DeFi, which refers to the financial structures in the blockchain network and is thought to revolutionize today’s financial world, is receiving more investment. That’s exactly why we want to talk about top DeFi tokens in today’s article.
This new technology, which can also be used as a service that allows users to earn interest and borrow money, therefore increases the appetite of developers to create additional services through new tokens.
According to an article by Cointelegraph, the value of all DeFi protocols is around $5 billion. In addition, according to an analysis by the famous American bank JPMorgan, DeFi is at the very beginning of its path and is in demand far below its potential.
Long story short, DeFi holds a lot of potentials. Let’s get to know the top 10 DeFi tokens that have a -role in the growing potential!
Note: The order is taken from the list by Coinmarketcap.
Table of Contents
Terra (LUNA)
Developed by Terraform Labs, Terra LUNA is an Ethereum blockchain-based project that fortifies cryptocurrencies such as the Terra US dollar and UST and its financial applications. Terra’s goal is to reduce the market volatility often observed in cryptocurrencies by using stablecoins to be used in global wide transactions. These cryptocurrencies are pegged to the US dollar through an algorithm. Each time a new UST token is attempted to be minted, another Luna is burned from the market.
So how does the Terraform Labs team intend to preserve the value of UST? Let’s say in the near future, if more people use the currency, the required amount of Luna will be automatically burned and stored in a community pool to protect the market.
Do Kwon, CEO of Terraform Labs, says that LUNA has benefits thanks to the economic growth of the Terra economy. However, it suffers due to the contraction of Terra cryptocurrency.
Avalanche (AVAX)
Avalanche is a blockchain platform where decentralized finance applications, financial assets, trading, and so forth can be managed. It offers quicker transaction speed as well as scalability. Considering the transaction speed of Ethereum, it can be said that it competes with Ethereum.
The AVAX team urges to become a global exchange that enables anyone to trade any form of the asset while there are no centralized structures through contracts.
Emin Gün Sirer, the developer of the AVAX, says that Avalanche is the first smart contracts network to offer transactions that take place under one very second.
The platform’s token, AVAX, allows users to perform tasks within Avalanche while also being a reward and payment system.
Wrapped Bitcoin (WBTC)
WBTC, Wrapped Bitcoin, ERC-20 token that is traded in the DeFi garden and brings together Ethereum and Bitcoin. This token, which was released to provide liquidity to the DeFi network, has the same value as BTC. Simply, WBTC is Bitcoin’s shadow on the ERC-20 network, and 1 WBTC is equal to 1 BTC.
Wrapped Bitcoins can be exchanged with each other. Compared to the BTC, WBTC can be transferred faster. However, the advantages of WBTC are not limited to this. What is more, WBTC can be used in DeFi apps and smart contracts in the Ethereum world.
Wrapped BTC was circulated on Ethereum in January 2019. WBTC is the product of a collaborative effort by BitGo, Ren, Dharma, MakerDAOyber, and Set Protocol. The main purpose of WBTC is to provide more liquidity to Ethereum.
Uniswap Token (UNI)
Although the UNI Token was launched in 2018, it gained its real popularity in 2020 thanks to the increasing interest in DeFi projects. A significant increase in its value was observed at that very year.
Also, Uniswap and Uniswap Token are not the same. Uniswap is a decentralized exchange with open software, while Uniswap Token is a token that provides a say in managing the exchange, which is a voting right.
Chainlink Token (LINK)
Chainlink is a globally functioning decentralized digital network. The project aims to create a bridge between different banks and blockchain. Smart contracts are needed to transfer data not included in the blockchain to the chain. The data contained in the contract is transmitted to the Chainlink network for the best bidder among the nodes. Thus, off-chain data is transferred to the blockchain. This entire network is maintained via the LINK token.
Dai (DAI)
Unlike centrally stable cryptocurrencies, DAI is not backed by US dollars. But instead, DAI is a collateral-backed stable coin functioning on the Ethereum blockchain network, which is branched out from the MakerDAO.
DAI has been designed for users to use a stable asset that is less volatile than other cryptocurrencies like bitcoin and ether. Holders can make use of the DAI to perform P2P money transfers, pay for services, or store of value. The Maker Protocol’s Dai Savings Rate enables people to stake their coins to the DSR contract to acquire savings.
Fantom (FTM)
FTX token is the native cryptocurrency of the crypto derivatives trading platform called FTX. In addition, FTX is backed by Almeda Research, one of the largest liquidity providers.
To define, FTM is a scalable, verifiable cryptocurrency for smart contract execution that uses aBFT principles to gather a consensus. The FTM token plans to provide fast and secure compatibility between all trading bodies in the world using DAG technology.
It can also be used to pay transaction fees, stake with a validator nod, and have a right to vote on-chain governance proposals.
Tezos (XTZ)
The Tezos (XTZ) token is an instrument used by Tezos blockchain users to make joint decisions and further develop the platform. Unlike the Ethereum network, Tezos allows changes to be made on the platform.
Tezos is based on an incentive idea where users are involved in the core development of the Tezos protocol. However, the formal mathematical proofs for the blockchain network are still required to ensure certain features of the Tezos protocol are preserved, which keeps the network decentralized.
A Tezos baker can earn Tezos tokens by staking. However, they need to perform the validation process for this. In the Tezos baking system, each baker receives a reward for the blocks they sign and publish to acquire a reward in exchange
Aave (AAVE)
Aave is a decentralized finance protocol developed by Stani Kulechov that allows users to lend and loan cryptocurrencies. One of the biggest features that distinguish the project from other DeFi loan and borrow tokens is the abundance of options available to users. Aave makes it possible to borrow and lend in about 20 different cryptocurrencies.
Apart from being a governance token, AAVE provides its investors with a discount on the transaction fees incurred on the platform. In addition, users holding Tokens get voting rights in the update processes.
The Graph (GRT)
The Graph (GRT), developed by Yaniv Tal, Brandon Ramirez, and Jannis Pohlmann, is an indexing protocol. It is designed to query data on networks such as IPFS and Ethereum, which power applications in both DeFi and Web3 ecosystems. With GraphQL, everyone can build open subgraphs to query and withdraw data from the blockchain.
Theta Network (THETA)
Theta (THETA) is a blockchain network designed to create a new universe for video streaming in the DeFi world, allowing users to trade knowledge for bandwidth and computing resources. Users can share and simply trade information with each other on a peer-to-peer (P2P) basis.
THORChain (RUNE)
THORCHain is a decentralized liquidity protocol, enabling traders to easily exchange cryptocurrency assets by utilizing various networks without losing full custody of their assets. The platform also enables users to exchange assets with each other in a permissionless setting while no order book is required since market prices are determined depending on the ratio of the assets in a pool.
THORCHain has its native utility token, named RUNE, which is required for the consensus and security of the platform.
PancakeSwap (CAKE)
PancakeSwap is one of the most known and used decentralized exchanges (DEX) on the Binance Smart Chain. The PancakeSwap DeFi application provides the most fundamental trading setting where users can buy and sell dozens of tokens while offering different staking and farming options such as CAKE and SYRUP.
The platform also utilizes an automated market maker model, meaning that traders can exchange against a liquidity pool funded by the users so that they can receive liquidity provider (LP) tokens in return.
Maker (MKR)
Maker (MKR) is an Ethereum blockchain system, a DeFi project with ERC-20 infrastructure, allowing users to issue the DAI stable coin.
The platform is shaped by the opinions and votes of the users. For example, for an oncoming new update, change, and development on the Maker platform or protocol, a step is taken according to users’ votes holding Maker in their wallet.
Therefore, if an MKR owner wants a change in the Maker ecosystem, they should try to get votes from other MKR users. Thus, that change is made or not made based on the vote results.
Convex Finance (CVX)
Convex Finance is a DeFi platform based on Curve Finance, designed to provide revenue optimization and automation protocol. The platform allows users to stake and participate in governance voting through the native token CVX, offering users increased CRV and liquidity mining rewards.
Convex offers its users four different options to use on their platform to earn passive income. A user providing liquidity to one of the Convex-supported Curve liquidity pools will receive the following revenues:
- Interest-based on the base rate
- Slice of Curve platform transaction fees
- Curve-supported CRV rewards
- CVX tokens via liquidity mining
Stacks (STX)
Stacks is a layer-1 blockchain solution developed to adapt smart contracts and decentralized applications to the Bitcoin universe. It is ensured that the smart contracts are registered to the Bitcoin universe without changing their features. The Stacks platform makes it possible to run DApps and smart contracts without compromising on the Bitcoin network’s stable working structure – which is its strongest point.
The protocol leverages Proof of Transfer as the consensus algorithm, which means that miners connecting directly to the blockchain network can pay in BTC to generate new STX. On the other hand, token holders can generate passive income and earn Bitcoin by stacking STXs.
The platform is fueled by the native token named Stacks token (STX), required to execute smart contracts and transactions. STX token is also required for registering assets on the Stacks 2.0 blockchain.
Loopring (LRC)
LRC is an open protocol on the Ethereum blockchain, developed for decentralized crypto exchanges. Loopring is not a decentralized exchange. Rather, it is a layer-2 protocol whose goal is to facilitate the trading of digital assets through order matching. It simply works like this: the platform pools all orders sent to its network and fills them through the order books of multiple exchanges.
Both DEX and CEX platforms and platforms using smart contracts can integrate with Loopring, which means cross-trading to access the best prices across the market is provided to the investors.
Basic Attention Token (BAT)
Basic Attention Token is designed to pave the way for integrating digital advertising platforms with a blockchain-based technology by utilizing a reward system so that advertisers get a better return on their ad spends. Brave Browser is used to reward users, displaying customized ads to maximize engagement while providing an amount of BAT in return.
Curve DAO Token (CRV)
Curve is a decentralized exchange designed for stablecoins, running on the Ethereum-based Aragon tool while using an automated market maker to organize liquidity.
The platform benefits from Aragon to connect multiple smart contracts for deposited liquidity but not governance.
Neutrino USD (USDN)
Neutrino USD is a stable coin pegged to the US dollar and backed by WAVES. With USDN, users can receive rewards and stake. Moreover, all transactions are carried out with a smart contract completely transparently.
Using WAVES as the reserve, the entire system is calibrated so that Neutrino USD can maintain its fixed price. On the other hand, the Neutrino Protocol, on which USDN is based, is an algorithmic, price-stable cryptocurrency protocol that allows stablecoins to be created as they are collateralized by national currencies.
USDN is issued based on a smart contract to offer WAVES tokens as collateral at a 1:1 ratio against the US dollar. USDN is granted when users execute the swapWavesToNeutrino smart contract. Thus, WAVES for USDN at the current price in the smart contract are provided.
Compound (COMP)
Compound is a DeFi platform based on a lending protocol in which users can earn through interest as they deposit cryptocurrencies to one of the supported pools and receive a cTokens in return. cToken acts as a figure stating the stake amount a user has and is required to have back the deposited-for-stake cryptocurrency.
For instance, if you stake BTC, you will receive cTokens in return, and as the BTC increases, you can redeem more cTokens depending on the price change.
Moreover, users can borrow and benefit from a secured loan from any Compound pool as long as they provide the collateral amount.
Theta Fuel (TFUEL)
Theta Fuel (TFUEL) is a decentralized new generation video delivery network developed for combining blockchain technology with the power of users interested in social networks. Although TFUEL is known as a gas token in the Theta blockchain, it is also used for video and data sharing as a utility token.
In other words, Theta Fuel is an open-source protocol built to power an underlying distributed streaming network that will then allow DApps.
Theta Fuel simply “fuels” all transactions on the Theta blockchain, like payments to streamers, fees for the distribution and interaction of smart contracts, and fees required for NTFs and DeFi-based executions.
What are the popular DeFi tokens?
According to the Coinmarketcap, the most popular DeFi tokens are LUNA, AVAX, WBTC, UNI, and LINK.
What is a DeFi token?
A DeFi token is a tokenized asset used within a DeFi app.
What is the future of DeFi?
JPMorgan estimates DeFi has grown more than 50% since the first-ever DeFi app came into our lives. Considering this and how young the DeFi projects are, DeFi’s future looks promising.
Which DeFi token has the most market cap?
According to the Coinmarketcap, LUNA holds the most market cap among other DeFi tokens.
Is DeFi worth investing in?
No one can give general advice about whether to invest in DeFi projects or not because each project’s future, goals, and services are different. For this reason, the profit and loss margins they will cause will change accordingly.
