17. DeFi cryptos

Monday 21st February 2022

The top DeFi cryptos are AAVE, BAL, CAKE, COMP, CRV, MKR, SUSHI, UNI.

1. Aave (AAVE)

Aave (AAVE) is 2 things - a decentralized finance protocol as well as a crypto token.

As a protocol, it enables the lending and borrowing of crypto. Lenders deposit digital assets into liquidity pools. Borrowers put up crypto collateral and take "flash loans" using the liquidity pools.

As a token, it gives holders discounted fees and also serves as a governance token by giving holders a vote in the protocol's development.

2. Balancer (BAL)

Balancer (BAL) is a non-custodial automated portfolio manager and trading platform.

In a conventional index fund, the investor pays fees to a portfolio manager for rebalancing the portfolio.

In Balancer, the investor collects fees from traders who rebalance their portfolio by following arbitrage opportunities.

3. PancakeSwap (CAKE)

PancakeSwap (CAKE) is an automated market maker and yield farm on the Binance Smart Chain (BSC). Although PancakeSwap is a fork of SushiSwap, it enables cheaper and faster transactions because it runs on BSC.

PancakeSwap also provides yield farming, lotteries, and initial farm offerings.

4. Compound (COMP)

Compound (COMP) enables users to deposit crypto into pools and earn interest. Borrowers take secured loans from Compound pools by depositing collateral. If this collateral falls below a threshold, the loan is automatically liquidated.

5. Curve DAO Token (CRV)

Curve (CRV) is a decentralized exchange liquidity pool on Ethereum. It is specially designed for:

  • extremely efficient, low slippage stablecoin trading, and
  • low risk, fee income for liquidity providers.

Slippage is the difference between the expected price of a trade and the price at which the trade is executed.

The fees and other parameters are decided by the Curve Decentralised Autonomous Organization (DAO). The fee on all the pools is 0.04%. Half of the fee goes to the liquidity providers and the other half to the members of the DAO.

6. Maker (MKR)

MakerDAO is a decentralized organization while Maker Protocol is a software platform, that allows users to issue and manage the DAI stablecoin. Maker (MKR) is the governance token of the MakerDAO and Maker Protocol.

MakerDAO is a decentralized organization while the Maker Protocol is a peer-to-contract lending platform.

Maker Protocol enables over-collateralized loans by locking ETH in a smart contract and minting Dai, a USD-pegged stablecoin. Dai can be traded and used for payments.

Maker (MKR) is the governance token of the MakerDAO and Maker Protocol.

7. SushiSwap (SUSHI)

SushiSwap (SUSHI) is a decentralized protocol for providing automated liquidity on Ethereum.

It is a decentralized exchange and a decentralized lending market. It also enables yield instruments and staking derivatives.

In late 2020, Yearn.finance and SushiSwap announced a merger under which they would share development resources, but maintain separate tokens and governance systems.

8. Uniswap (UNI)

Uniswap (UNI) is a decentralized protocol for automated liquidity provision on Ethereum.

One major problem with illiquid assets on regular exchanges is "high spreads".

Uniswap solves this problem by enabling everyone to become a market maker. Uniswap suffers from high slippage for large orders because the price paid increases with the increase in the quantity.