Top Five Decentralized Finance Platforms This Year (2023)
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Decentralized finance is a huge and interesting trend in the blockchain sector. Even a lot of people are of the opinion that it may overrun conventional finance. As the financial industry continues to evolve, there is a need for a more efficient decentralized network to assist innovations that have the potential to revolutionize how we understand the exchange of currency.
Decentralized Finance (DeFi)
A decentralized finance platform refers to a website that provides “non-centralized” financial operations and tools. These may include some or all of the following: investing, insurance, trading, lending, tokenized real estate, and lending.
A bank or other financial organization typically acts as the middleman when there is centralized finance. Through the use of blockchain technology, transactions in decentralized finance are peer-to-peer. Users’ acceptance of DeFi demonstrates its potential, and data from the previous three years confirms this.
The sum total of the locked value in all decentralized finance projects was below a billion dollars as of January 2020 but surged during the pandemic period as activity in the cryptocurrency market increased. This caused the Total Locked Value (TVL) to skyrocket to $248 billion.
By 2022, the cryptocurrency bull run had peaked, and the market had experienced a severe crypto winter. Despite the fact that DeFi was also impacted (TVL had fallen to just $42 billion), the figures are still much greater than they will be in 2020.
Similar to how money is “locked” in conventional mutual funds or CDs, TVL. This measure, which represents the amount of money a DeFi platform has accessible to it, similar to a bank’s lending and borrowing capacity, is significant. However, a lot of DeFi projects gain a lot of funding quickly before failing due to a lack of users, making TVL a useless measure.
Nevertheless, a TVL is part of the whole story about the decentralized finance ecosystem. Another important factor to consider in a DeFi protocol is how long it has existed and how sustainable it is. Sustainable in the sense of how strong its community of users is. This is similar to how one will evaluate a traditional bank based on how happy their customers are, not just the number of customers they have.
Lido (LDO)
Lido was released concurrently with the Ethereum 2.0 Beacon Chain as a liquid staking alternative for Ethereum and other PoS chains. With the non-custodial staking services provided by the protocol, users can stake their tokens without locking up any assets or keeping up any staking infrastructure.
Launched in 2020
Chain: Ethereum
Offered Services: Liquid Staking
TVL (Total Value Locked): $13,900,000,000
Uniswap (UNI)
This is a decentralized exchange that was built on the Ethereum network. Uniswap gives its users the opportunity to buy and sell ERC20 tokens at will and very quickly. This exchange does this through the use of an algorithm that matches trades using supply and demand in a liquidity pool. This eliminates the need for an intermediary.
Launched in 2018
Chain: Ethereum
Services: Token Exchange/Lending
Total Value Locked: $3,200,000,000
Community Following: 1,170,582
Aave (AAVE)
An Ethereum-based, decentralized peer-to-peer marketplace for lending and borrowing digital assets is called Aave, formerly known as ETHLend. Borrowers and lenders can agree on loan terms using the peer-to-peer lending platform, which is then carried out through smart contracts.
Launched in 2017
Chain: Ethereum
Offered Services: Borrowing and Lending
TVL (Total Value Locked): $4,410,000,000
Community Following: 609,255
Curve Finance (CRV)
This is another decentralized exchange project on which users can exchange and trade assets that are ETH-based. Additionally, it aims to supply liquidity to the market by utilizing a market-making algorithm. This algorithm automatically purchases and sells digital assets while making profits from bid and ask price spreads. It rewards users for supplying their tokens to the general market by paying them interest.
Launched in 2020
Chain: Ethereum
Offered Services: Borrowing and Lending/Decentralized Exchange
TVL (Total Value Locked): $2,401,000,000
Community Following: 370,784
Maker (MKR)
The stablecoin DAI, which strives to maintain its value one-to-one with the US dollar, is supported by the decentralized Collateralized Debt Position (CDP) platform MakerDAO, which runs on Ethereum. By locking up ETH or other Ethereum assets as collateral to obtain DAI as a debt against the locked-up assets, users can open a Collateralized Debt Position (CDP). For interest payments, the platform employs the MKR token, and after the CPD is closed out, the DAI and MKR paid are burned.
Launched in 2018
Chain: Ethereum
Offered Services: Borrowing and Lending/Stablecoin
TVL (Total Value Locked): $5,130,000,000
Community Following: 301,906
Conclusion
For cryptocurrency investors, the ongoing interest in DeFi initiatives is positive. The DeFi field continues to be one of the most intriguing to watch due to the ongoing innovation and growth of these decentralized financial services as well as the addition of new protocols.
