With time comes growth, opportunity, and, most importantly, change. We saw this when DVDs were traded in for streaming apps, when books were cast aside for tablets, and now, as cryptocurrencies are taking the place of traditional forms of payment. Cryptocurrencies are currently taking the financial world by storm, and the blockchain domain is growing at a tremendous rate. As a result, crypto enthusiasts are met with a wealth of opportunities. But right now, they are all focused on one thing — decentralized finance, or DeFi.
DeFi has appeared as people are looking for ways to explore their possibilities in finance. As such, decentralization enters into a new trustless and transparent financial services domain. Compared to the centralized banks we are currently well-versed with, an anticipated decentralization of blockchain technology would turn the financial world upside down.
So, whether you are a crypto enthusiast or a newbie in blockchain technology, you may want to know about DeFi and its impact on the future. This article lists five major DeFi projects that will shape global and traditional finance views.
Top 5 DeFi Projects/Tokens By CoinMarketCap To Watch In 2022
#1. Colony Lab: Best De-Fi Project on Avalanche Blockchain
At the top of our list of DeFi projects is the Colony project. Colony is the first future-oriented, community-driven fund. This project has already received support and investment from the Avalanche Foundation, so it is essentially an Avalanche project.
Simply put, Colony is an entourage of smart contracts that provide the framework for an organization’s essential functions. Apart from funding, this project caters to online organizations’ ownership, structure, and authority.
So, how do you start? The first thing you will need is tokens. DeFi applications, such as Colony, run on networks with their native tokens. You can identify these tokens through the ticker symbol used on exchanges.
After you purchase the tokens, you will need to move them into a wallet you control that supports Colony. You will use the tokens to move the funds around. Still, you will want to choose a network with the lowest fees since moving funds incurs transaction fees. Also, be careful about the network by being sure you pick the right one. It is good to research so as not to fall for a scam.
On the network, you will encounter different types of services, the most popular of which is a decentralized exchange (DEX). You can also provide liquidity in exchange for earning interest or lend funds and charge interest. The possibilities are endless. All you need to do is connect your wallet that is compatible with DeFi protocols to the supported network and log in to your account.
Colony is a community-driven Avalanche ecosystem accelerator, and Colony’s CLY token powers it. This project aims at providing early-stage funding to projects built on Avalanche. It will also provide liquidity to existing Avalanche DeFi Protocols. Colony purchases and stakes (AVAX) Avalanche and upcoming subnet tokens. In addition, it purchases chosen Avalanche projects to form an index.
Colony has already established ties with Avalanche and is expected to share deal flow to create the groundwork for project-building on the platform. The main feature of this project is that it is community-based.
Furthermore, it includes a regulated framework that allows investors to familiarize themselves with the Avalanche ecosystem, thus stimulating its growth with fresh market cap. From the beginning, the project is provided with an initial community. Plus, it will work alongside Avalanche and other key players in the ecosystem.
It is good to remember that Avalanche’s ecosystem is for the development of DeFi. The Colony project will help achieve Avalanche’s vision through a complete decentralized exchanges and democratized financial world. One of the reasons for this is because Colony delivers an incentivized foundation for novel decentralized applications on the Avalanche network. While funding is crucial, Colony depends on marketing, momentum, tech expertise, and networking for its success. Additionally, Colony generates proper sustenance and value since its investments will be routed back to the community through airdrops, staking rewards, and a buyback mechanism.
Now, Colony has two complementary pillars. The first is access to early-stage deals previously accessible by institutions and their investors. Colony’s core team will perform the project’s rigorous investment process, and the team is composed of experts in the crypto industry. As such, these equity specialists will review and score promising projects using a stringent analysis note. Next, Colony’s network of investment firms will create funding efficiencies by making the builders on the Avalanche Protocol market-ready. So, once a project has completed the first stage, it will not have to worry about raising capital but instead focus on development.
The second pillar is DAO (Decentralized Autonomous Organization). Its primary objectives are deepening liquidity within the Avalanche ecosystem and using staking to strengthen the health and security of the network. This pillar is also designed to capture Avalanche’s growth DeFi assets through a dedicated index.
Overall, Colony bridges DeFi and traditional finance to harness value creation on the Avalanche network through its community. Its Initial Index Offering (IDO) is scheduled for Q4 2021.
Therefore, Cryptominati Capital formed a partnership with Colony Lab as a private round investor. They have recently tweeted, “Avalanche ecosystem is a game changer and Colony Lab is providing the ecosystem with funding and liquidity.”
#2. Aave: Decentralized Finance Platform Showing Liquidity Protocol
Aave is another decentralized finance platform where users can lend and borrow a wide range of cryptocurrencies. The platform facilitates peer-to-peer lending via smart contracts enabled by a crypto pool. People seek to lend crypto to earn interest or borrow capital in exchange for paying interest.
Aave is built on the Ethereum blockchain. Smart contracts manage all of its assets, so users rely on a series of algorithms and a network of computers running Aave to handle deals. You no longer have to trust or pay only to traditional banks or financial institutions to take care of your funds.
Aave aims at making essential financial services more accessible, which means you can lend and borrow without oversight from banks, brokers, and intermediaries. All in all, you are investing in technology while having a say in its future.
Currently, the platform has 26 different cryptocurrencies available for depositing where you can earn interest, and 25 of them are available for borrowing. Some of the options for depositing and borrowing are ETH, LINK, and LEND, among others. It is good to know that most cryptocurrencies are stablecoins like USDC.
On the Aave website, you will be able to see the borrowing and lending rate of each cryptocurrency. Essentially, Aave uses an algorithm to establish current rates based on the utilization rate. For example, if there is not much crypto left in the pool, the interest rate is high so more people can deposit crypto. On the other hand, if hardly any crypto has been utilized, the interest rate is low so more people can borrow.
Aave has two different DeFi tokens. The first is AAVE, which is the native governance token of the Aave protocol. When you buy AAVE tokens, it is the same as buying the shares of a company. As such, you can vote on improvement proposals that can change the direction of the protocol.
The second Aave token is ATokens, which are interest-bearing tokens issued to lenders to collect interest on deposits. The interest accrues directly in your wallet, and these tokens are pegged in a ratio of 1:1 to the value of the underlying asset you have deposited.
One of the most popular loans you can acquire on Aave is a flash loan, which you can use to take advantage of arbitrage opportunities in the crypto ecosystem. Flash loans do not require collateral. However, you need to pay back the loan in the same transaction, usually in a few seconds. If payment does not happen within the same transaction, it is reversed. Aave protocol has a limited supply of 16 million tokens. Three million of these tokens are in an DeFi ecosystem reserve contract for use in program development.
In addition, Aave staking is another feature of the Aave protocol. Essentially, this is a safety module where you can stake Aave tokens to act as insurance against market pitfalls. For example, if one of the popular stablecoins on Aave was to lose its pegs to the U.S. dollar, one can use up to 30% of the safety module to pay back the loss from the event.
Since the Aave Protocol launched in 2020, you can now use the platform to lend and borrow real funds.
#3. Fantom: Digital Assets, dApps, & Smart Contracts
Ethereum was the first cryptocurrency to provide smart contracts. However, it has been experiencing congestion issues and high transaction fees since then. As a result, several alternatives have been developed, offering faster transaction processing at a lower cost.
One of the alternatives is Fantom, an open-source smart contracts platform for dApps and digital assets. This platform simplifies borrowing, lending, and trading of synthetic assets. All you have to do is access your digital wallet, deposit tokens, and you can start earning.
Fantom is on the rise because it has a network architecture that offers a viable solution to the blockchain trilemma. It aims to provide a steady balance of security, stability, and decentralization. The platform is fast and draws its speed from a unique consensus mechanism called Lachesis. Thanks to this, transactions are nearly instant. So, as a smart contract-enabled blockchain, it is a robust environment for dApp development.
Fantom’s efficient transaction processing ensures transactions are settled in one to two seconds. It can handle thousands of transactions per second, and they usually cost a fraction of a cent. It is no wonder the transactions on the Fantom platform had surpassed three million in May.
Fantom is instrumental in decentralized finance (De-Fi), and it does not need a governing body. Its infrastructure is tied together through its aBFT (Asynchronous Byzantine Fault Tolerant) POS consensus mechanism. As a result, it can maintain the operational efficiency of the entire network.
Fantom’s consensus mechanism aBFT validates data and transactions on the network. As a result, it can achieve an agreement trustingly and transparently. Again, the aBFT network structure can preserve a network’s security while maximizing speed.
Fantom is used for payments thanks to its high throughput and speed. It is also ideal for on-chain governance and governance activities. By this, it means that if you own tokens on the FTM network, you will be able to vote on improvement proposals, propose changes, and carry out decisions using on-chain governance. Your influence will depend on the amount of FTM you hold.
Fantom is suitable for staking rewards. Here, you will be able to earn a minimum Annual Percentage Rate (APR) of 3.79% up to a maximum of 11.59%. The APR depends on the amount of FTM you have staked and the total lock-in period.
Furthermore, Fantom is also used for network fees and compensating validators. Although the rate is significantly low, Fantom pays transaction fees and the charges needed to create new networks and smart contracts. FTM is also used to pay validators who keep the platform running without hacks and scams and validate transactions.
Fantom has its integrated DeFi stack, which allows users to mint fUSB using FTM tokens. fUSB is Fantom’s native stablecoin pegged 1:1 to the U.S. dollar. You can use it to trade, borrow, and lend against 176 tokens and synthetic assets, including fETH and fBTC.
Fantom is currently trading at USD 2.03 as of Nov. 17, 2021. Its 24-hour trading volume on exchanges is approximately $748,138,557.20.
#4. PancakeSwap: Most Popular Decentralized Platform
PancakeSwap is another emerging decentralized finance protocol. This DeFi project was introduced just a year ago, based on the Binance Smart Chain as an automated crypto market maker. Like Aave, PancakeSwap is a trading liquidity provider.
By the end of October, users on PancakeSwap had staked more than five billion on this decentralized exchange (DEX). Compared to peers such as Uniswap and with a market value of only four billion, PancakeSwap is a bargain.
There are many reasons why PancakeSwap is a convenient choice for coin holders. One, PancakeSwap is built on the Binance Chain BEP-2. Binance is the world’s largest cryptocurrency exchange averaging $27 billion in daily trade values. Secondly, this platform is audited by CertiK, a leading smart-contract security firm. As such, it is more trustworthy than unaudited DeFi projects.
On PancakeSwap, you can trade tokens and cryptocurrencies without intermediaries and keep custody of your tokens. Although PancakeSwap is run on Binance, it is not controlled or operated by Binance. The service is much like Uniswap or Ethereum DEX.
PancakeSwap is used precisely for BEP-20 tokens that run on the Binance Smart Chain. However, you can bring tokens from other platforms through Binance Bridge. From there, you can ‘wrap’ them as BEP-20 tokens for use on PancakeSwap DEX.
PancakeSwap uses an automated money maker (AMM) model, which relies on user-fueled liquidity pools for enabling crypto trades. Users deposit their funds in the pool in exchange for liquidity provider/LP tokens. You can use these tokens to reclaim your share or a portion of the trading fees and lock your tokens in the liquidity pool to earn rewards. Furthermore, you can use the tokens to swap for the coins you want. On PancakeSwap, you can also farm additional tokens like CAKE and SYRUP.
CAKE is the first reward you get after locking your LP tokens in the liquidity providers pool. Now, you can then stake CAKE tokens to receive SYRUP tokens. With SYRUP tokens, you get more functionality like governance tokens or tokens that may be used as lottery tickets.
Another feature of PancakeSwap is that it offers game-like experiences. For example, you can wager whether the price of Binance Coin (BNB) will rise or fall within a specific window of time. In the lottery feature, users can buy tickets with the hope of winning a major CAKE windfall. Also, PancakeSwap offers a wide variety of bunny-themed NFTs. Plus, there are IFO (Initial Farm Offering) sales to buy new coins from budding projects.
To use PancakeSwap, you need a crypto wallet. The decentralized insurance platform works with Math Wallet, Trust Wallet, Binance Chain Wallet, and even MetaMask. Although MetaMask is an Ethereum wallet, it can be configured to work with the Binance Smart Chain.
PancakeSwap is very popular alongside Uniswap and Sushiswap, Ethereum’s biggest DEXs. If Ethereum continues to experience high transaction fees and congestion, PancakeSwap is positioned to gain an even better hold of the market against its rivals.
#5. The Graph: Decentralized APIs for Future
The Graph (GRT) is a decentralized protocol for querying and indexing data from blockchains. It operates like Google indexes information on the web to improve accessibility. So, similarly, The Graph indexes data from blockchains like Ethereum and Filecoin.
Previously, The Graph was only able to index on Ethereum. However, since the NEAR blockchain tested it, it began running on blockchains not compatible with the Ethereum blockchain.
The Graph groups the data into open APIs known as subgraphs. This process makes it easy for developers to query the data through The Graph QI API. Since it makes data easily accessible, it provides required data to DeFi applications, like DEXs, to operate efficiently.
This protocol managed to support non-Ethereum compatible blockchains after a grant from The Graph Foundation to StreamingFast, a blockchain data company. Developers use The Graph to access data such as prices and user information. As of Nov. 2021, the protocol lives on 25 blockchain networks. After that, StreamingFast became a significant contributor to The Graph.
The foundation still distributes grants to projects building on The Graph. Still, it will continue to issue grants that help The Graph expand on blockchains not compatible with Ethereum. The Graph has established itself as a crucial component of DeFi infrastructure, and subgraphs can be composed into a global graph with all of the world’s public information. This data can be transformed, organized, and shared across applications that provide instant access.
Since developers must choose between efficiency and decentralization, The Graph enables applications that work without sacrificing decentralization. GRT now facilitates seamless exchanges of data between applications and blockchains. Impressively, GRT has already hit over a billion queries since it launched in 2020. Now, the network states that if DeFi takes over centralized finance, there is a need to have a simple way to query the data required to create them.
The Graph has executed adding layers of screening on blockchains that support smart contracts — all thanks to the force of the Ethereum token. Moreover, it supports indexing data from Ethereum and POA, and IPFS. dApps like Aragon, Synthetix, Uniswap, Balancer, Gnosis, and many others have deployed over 1,700 subgraphs.
GRT’s popularity is growing, and its current price is $0.65 with a 24-hour trading volume of $136,511,855. The Graph is expected to reach a +212.52% revenue increase by 2026.
Conclusion: List Of Top DeFi Projects To Look Out For
Upon reading this article, you might be wondering, what exactly is the future of DeFi? DeFi is all the rage right now thanks to endorsements from billionaire entrepreneurs and investors, like Mark Cuban. As a result, DeFi saw an increase in monthly volume of $39.5M in Jan 2019 to $173 billion in May 2021.
DeFi offers lots of advantages, such as removing intermediaries and brokers. It is also seen as a better finance tool in countries with underdeveloped financial systems, and anyone can create DeFi and use dApps for seamless operation with your money.
However, with all of its advantages, it is yet to go mainstream. Maybe it is because most people do not have traditional access to such platforms. Also, the conventional financial system, including companies and monetary authorities, is still reluctant to integrate new tech. Still, any project that plans on being a part of the future must adapt to a multichain future. Otherwise, it risks being irrelevant.
As we look upon the future of the DeFi space, it still stands to overcome scammers and swindlers. The fact is, over $361M has been lost to scamming within the DeFi industry according to cryptocurrency AML compliance solutions. With that said, let us not be quick to dismiss these platforms, as it is yet to evolve into a secure network fully. It is still facing the same problems the crypto space was experiencing in its early stages.
Decentralized finance applications allow you to control and own your crypto assets fully. These apps also give you the freedom to interact with the financial system on a peer-to-peer level. Since DeFi projects are run on top of blockchain networks like Ethereum, they have become increasingly popular.
We have scanned the DeFi market to narrow it to the above five projects that are turning heads in the DeFi sector. These players include community-driven protocols, liquidity pool platforms, and industry facilitators. We believe these projects will undoubtedly unsettle traditional finance. However, you might still want to be cautious when investing in any DeFi project.