New DeFi investors can find that the market is a bit confusing at first. There are so many new platforms, features, and business models entering the market weekly. All of these new platforms are on the cusp of the DeFi revolution. Depending on your investment strategy, you may find some of these networks better suited to your overall goals.
Deciphering the new features of DeFi platforms is another struggle new investors face. Terms like liquidity staking, yield farming, governance tokens are all new to the sector. This new terminology adds to the confusion. Unfortunately, it can also lead to scammers entering the market to take advantage of your excitement and lack of understanding.
If you want to be a successful DeFi investor, you need to stick with reputable projects or are from well-known developers. Thankfully, you don’t have to sort through every DeFi platform in the market to find the best opportunities. Here are 6 DeFi platforms that are worth checking out in 2021.
Uniswap
Uniswap is the top DEX (decentralized exchange) in the world. DEXs differ from centralized exchanges in that they never hold your cryptocurrency directly. Instead, your trades complete via a peer-to-peer protocol. This strategy makes these platforms more secure for users because hackers don’t have much to gain compared to massive centralized exchange wallets.
Uniswap is also the number one Ethereum Dapp in the market. Currently, the platform is home to over one hundred thousand ERC-20 tokens. As the first DEX aggregators to allow anyone to create or seed a market, Uniswap plays a vital role in the market today. New projects seek Unsiwap's open markets to gain liquidity.
Recently, Uniswap expanded its service to include a yield farming protocol called the Uniswap Money Market. Uniswap's new protocol provides its colossal user base the opportunity to stake their crypto in liquidity pools. Users can then borrow from these pools. Notably, users receive rewards based on the amount and time they stake their crypto in these pools.
DYP.Finance
DYP. Finance is one of the most advanced DeFi platforms to enter the market yet. This next-gen platform seeks to change the way you earn DeFi profits. For example, DYP is the first network to allow users to stake DeFi tokens and receive their rewards in ETH. This maneuver provides a massive benefit for both traders and the network.
For one, it saves users the time and fees associated with converting DeFi tokens over to ETH. Secondly, it helps to bolster the Ethereum network's long term value. Also, it provides a unique deflationary measure to the network. In this way, whales can’t tank the project like what recently happened to SushiSwap after the creator drained the liquidity pool.
DYP is all about transparency. For example, users vote on all relevant upgrades to the market. These voting sessions cover everything from upgrades to adding new pools to the system. They also vote on the fate of any unconverted DYP tokens. Specifically, the community decides to burn these tokens or redistribute them to the network via the liquidity pools.
Yearn Finance
Yearn Finance is an open-source DeFi lending protocol. This yield farming platform allows users to stake their crypto in farming pools and earn interest. Unlike some of its competitors, Yearn functions across multiple platforms to maximize your profits.
Specifically, Yearn Finance functions as a liquidity aggregator providing access to an automated yield farming strategy. This protocol switches funds between high-earning DeFi lending protocols like Compound, Aave, and dYdX. The network monitors these systems and circulates the invested amount to get the best interest rates.
The network also introduces Yearn vaults that allow investors to use any asset as liquidity to borrow against. Users can take out stablecoin loans and then utilize these funds to farm for more profits. These reinvested stablecoins are then repaid, and you keep all the profits.
SYNthetix
SYNthetix is a decentralized, synthetic-asset exchange that brings new flexibility into the sector. The network allows users to create synthetic assets collateralized by the Synthetix Network Token (SNX). Notably, synthetic assets are digital representations of an asset that show real-world assets’ prices using ERC-20 tokens. As such, Synths offer multiple advantages over the typical DEX in terms of trading.
To create Synths, users need to lock up SNX in the network’s smart contracts. These new assets can then trade globally in the same manner as any other decentralized token. Best of all, the network lets users perform conversions between Synths with the smart contract directly without the need to involve any third-party intermediaries.
SYNthetix offers DeFi staking services to its users. Notably, the staking and transaction fees from this network are distributed to SNX stakers every other week. The platform underwent a major upgrade recently. The Hadar upgrade enabled the tokenization of real-world assets such as oil commodities and stock indexes.
Polkadot
Polkadot is a decentralized protocol that enables users to connect multiple specialized blockchains into one unified network. The goal of the project is to streamline cross-chain communication and interoperability. In this way, Polkadot provides unprecedented economic scalability via a standard set of validators.
Anyone can create a new blockchain using Polkadot's network. The process is simplified due to the ability to swap in pre-built modules for faster deployment. Every new blockchain developer can customize and optimize their blockchain’s governance to meet their project's needs. Consequently, this platform continues to see usage throughout the DeFi sector.
DeFi developers are all about simplifying their building process. This week saw the network expand further to include the New York-based decentralized insurance platform Tidal. The company announced plans to use Polkadot's infrastructure to create DeFi insurance pools. The goal is to improve the capital efficiency for DeFi investors interested in insurance for their investments.
SYNC Network
SYNC Network is a decentralized finance platform that primarily comprises two contracts, namely the CryptoBond ERC-721 and SYNC ERC-20. Scott Bondsman, the network’s founder, introduces a new class of assets, the non fungible tokens, or the CryptoBonds that aim to strengthen the cryptocurrency industry as a whole.
The CryptoBonds are tradable, so users do not have to wait for them to mature. The platform employs a unique risk management strategy whereby the CryptoBonds should be half the SYNC tokens at a minimum. The strategy ensures that the SYNC token and its liquidity pools remain stable.
Users have a wide variety of tokens for creating CryptoBonds, and earn SYNC on their long term crypto holdings. Currently, there are 16 million SYNC tokens in circulation, which is less than 3% of the total supply. The network targets an emission rate of 5 million tokens per day, although it will half the rate after every 30 days. The rate will however translate into 630 million tokens a year, without including the tokens burned from CryptoBonds and their maturity interests.
2021 - DeFi's Year to Shine
No one can argue that 2020 turned out to be a breakout year for the DeFi sector. Looking forward, it appears that things are just getting started. These five platforms are sure to push ROIs to new heights in the coming months due to their unique market strategies. For now, DeFi users have an excellent selection of networks to suit their investment goals.
