Decentralized finance (DeFi) refers to websites that offer “decentralized” financial tools and services such as investing, borrowing, lending, trading, tokenized real estate and insurance.
With centralized finance, a bank or financial institution usually sits in the middle to manage the money; with decentralized finance, it is done peer-to-peer, using blockchain technology.
DeFi is one of the biggest trends in the blockchain industry, as many believe it will overtake traditional finance. The data from the last three years seems to validate this.
The total value locked (TVL) in DeFi protocols was under $1 billion in January 2020. Spurred by frenetic activity in the crypto markets during the COVID lockdowns, it surged to $248 billion by November 2021 – a phenomenal 350x rise in a matter of 22 months.
By 2022, the crypto bull run had run its course and the entire market was hit hard by a crypto winter. Although DeFi was also affected – TVL had dropped to just around $42 billion – the numbers still remain significantly higher than what they were at any point in 2020.
And as centralized platforms have collapsed, the allure of DeFi remains strong. TVL surpassed $50 billion in Q1 2023, indicating sustained interest in decentralized crypto platforms.
In this piece, our editors have researched the Top DeFi platforms to identify the tokens worth a closer look for crypto investors.
Beyond TVL: How We Rank DeFi
Our editors use a set of criteria that allow us to gauge the “trust factor” of DeFi websites, such as year of launch, community following and total value locked (TVL) in the protocols. Even though DeFi is a young industry, we’re looking for platforms that have stood the test of time, with a large user base and lots of value.
Most DeFi rankings look exclusively at TVL, which is misleading. The DeFi industry has nearly $50 billion locked in apps: think of this like money “locked” in traditional mutual funds or CDs. TVL does matter, as it represents the sum of funds available to a DeFi platform, like the lending and borrowing capacity of a bank.
That said, many DeFi projects quickly attract a lot of capital, then quickly flame out as users leave the service. So TVL is just one part of the picture. We also look for longevity, and the long-term ability to sustain a strong community of users — in the same way we would look at a bank’s history and customer happiness, not just its size.
| Platform | Services | Year launched | Com-munity Members | Total Value Locked (TVL) | Daily Active Address-es | Trans-action Volume | Score |
| Maker | Borrowing and Lending /Stablecoin | 2018 | 293K | 7B | 354 | 20M | 4.0 |
| Curve Finance | Borrowing and Lending /Decentralized Exchange | 2020 | 365K | 4B | 707 | 21M | 4.0 |
| Uniswap | Token Exchange /Lending | 2018 | 1M | 3B | 734 | 47M | 4.0 |
| Instadapp | Services /Bridge | 2018 | 47K | 1B | 30 | 207K | 4.0 |
| Lido | Staking | 2021 | 134K | 9B | 519 | 71M | 3.5 |
| Com-pound | Borrowing and Lending /Stablecoin | 2018 | 253K | 1B | 263 | 6M | 3.5 |
| Aave | Borrowing and Lending | 2017 | 593K | 4B | 477 | 12M | 2.0 |
| Convex finance | Assets | 2019 | 50K | 4B | 290 | 6M | 2.0 |
| JustLend | Borrowing and Lending | 2022 | 57K | 4B | 306 | 11M | 2.0 |
| Pancake-swap | DEXes | 2020 | 1M | 2B | 7500 | 29M | 1.5 |
Maker (MKR)
The Ethereum-powered MakerDAO is a decentralized Collateralized Debt Position (CDP) platform that supports the stablecoin DAI, which aims to maintain its value one-to-one with the US dollar. Users can open a Collateralized Debt Position (CDP) by locking up ether (ETH) or other Ethereum assets as collateral to receive DAI as a debt against the locked-up assets. The platform uses the MKR token for interest payments, and the DAI and MKR paid are burnt once the CPD is closed out.
Year Launched: 2018
Blockchain: Ethereum
Services: Borrowing and Lending/Stablecoin
Total Value Locked: $7,020,000,000
Community Following: 293,000
BMJ Score: 4.0
Curve Finance (CRV)
Curve finance is a decentralized exchange protocol on which users can swap and trade Ethereum-based assets. It also focuses on providing liquidity to the markets using a market-making algorithm that automatically buys and sells assets while profiting from the bid and ask price spreads, which incentivizes users to add their funds to the overall pool and earn interest.
Year Launched: 2020
Blockchain: Ethereum
Services: Borrowing and Lending/Decentralized Exchange
Total Value Locked: $4,960,000,000
Community Following: 365,000
BMJ Score: 4.0
Uniswap (UNI)
Uniswap is a decentralized exchange on the Ethereum network that enables users to trade ERC20 tokens autonomously and swiftly. It does so through an algorithm that matches trades based upon supply and demand in a liquidity pool, removing middlemen and intermediaries.
Year Launched: 2018
Blockchain: Ethereum
Services: Token Exchange/Lending
Total Value Locked: $3,950,000,000
Community Following: 1,153,000
BMJ Score: 4.0
InstaDApp (INST)
Popularly known as the “DeFi Smart Layer,” InstaDApp is a DeFi app based on the Ethereum network. It is designed to provide a single, easy-to-use access point to interact with multiple DeFi protocols. Instead of using 2-3 separate apps for lending, borrowing, or staking across protocols, InstaDApp allows users to do everything in one place.
Year Launched: 2019
Blockchain: Ethereum
Services: DeFi Token, DeFi Smart Accounts
Total Value Locked: $1,910,000,000
Community Following: 47,000
BMJ Score: 4.0
Lido (LDO)
Lido was launched in parallel to the Ethereum 2.0 Beacon Chain as a liquid staking solution for Ethereum and other PoS chains. The protocol offers non-custodial staking services, allowing users to stake their tokens without having to lock any assets or maintaining staking infrastructure.
Year Launched: 2020
Blockchain: Ethereum
Services: Liquid staking
Total Value Locked: $9,150,000,000
Community Following: 134,000
BMJ Score: 3.5
Compound (COMP)
Compound Finance is an Ethereum-based, open-source money markets protocol that enables users to borrow or lend against collateral. Anyone can participate in Compound’s liquidity pool and start to earn interest on their digital asset holdings. The interest rates adjust according to the supply and demand on the platform. Compound supports DAI, ETH, and USDC, among other digital assets.
Year Launched: 2018
Blockchain: Ethereum
Services: Borrowing and Lending/Stablecoin
Total Value Locked: $1,450,000,000
Community Following: 253,000
BMJ Score: 3.5
Aave (AAVE)
Aave, formerly known as ETHLend, is an Ethereum-powered, decentralized peer-to-peer marketplace for borrowing and lending digital assets. The peer-to-peer lending platform enables borrowers and lenders to agree on the loan terms that are then executed using smart contracts.
Year Launched: 2017
Blockchain: Ethereum
Services: Borrowing and Lending
Total Value Locked: $4,630,000,000
Community Following: 593,000
BMJ Score: 2.0
Convex finance (CVX)
Convex finance is a DeFi protocol built on top of Curve finance. Convex protocol maximizes yields by streamlining the Curve boosting experience. Curve LP (liquidity pool) providers can claim boosted CRV (Curve DAO Token) and earn trading fees without locking CRV themselves. Users receive a token called cvxCRV when they deposit a certain amount of CRV tokens into Convex. Moreover, users can choose to stake cvxCRV tokens and receive CVX tokens as staking rewards along with a part of CRV rewards from Curve through Convex.
Year Launched: 2019
Blockchain: Ethereum
Services: Assets
Total Value Locked: $4,020,000,000
Community Following: 50,000
BMJ Score: 2.0
JustLend (JST)
The first-ever official lending platform on TRON, JustLend enables users to borrow and lend their assets and earn interest on deposits. The interest rates on fund pools are decided by the overall supply and demand of TRON assets.
Year Launched: 2020
Blockchain: TRON
Services: Borrowing and Lending
Total Value Locked: $4,400,000,000
Community Following: 57,000
BMJ Score: 2.0
PancakeSwap (CAKE)
PancakeSwap is a popular decentralized exchange that offers token trading along with additional features like staking and liquidity pools. The DEX is based on the BNB Chain, which was formerly known as the Binance Smart Chain.
Year Launched: 2020
Blockchain: BNB Chain
Services: Trading, Staking, Yield Farming
Total Value Locked: $2,460,000,000
Community Following: 1,600,000
BMJ Score: 1.5
Getting Started with DeFi
There are a variety of ways to get started with DeFi:
- Earning Yield: One way to earn “interest” on your crypto assets is by depositing them in DeFi platforms such as Aave or Compound that will pay you an Annual Percentage Yield. (See our current list of Best DeFi Rates.)
- Liquidity mining: This allows users to earn yield for providing liquidity (capital) to a liquidity pool on a DEX (Decentralized Exchange). Users may also be paid rewards in the DEX’s in-house token, which may increase in value, a bit like owning “stock” in the company. (See our list of Top Dex Aggregators.)
- Trading on DEXs: Decentralized exchanges let people directly trade with each other, unlike centralized exchanges. This means you can often trade smaller coins on DEXes that you won’t find in centralized exchanges.
The sustained interest in DeFi projects is encouraging for crypto investors. With the constant innovation and evolution of these decentralized financial services, and the addition of new protocols, the DeFi space remains one of the most exciting areas to watch.
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- Source: https://www.bitcoinmarketjournal.com/defi-platforms/
