Previously oriented on digital payments and bitcoin transactions blockchain technology is conquering traditional financial systems today. In this article, we want to turn your attention to the best DeFi crypto projects on the market.
Blockchain-based DeFi startups have been leading the way in recent months. With the creation of stablecoin, decentralization of the financial market has become irreversible. As there is no potential to limit, according to MarketsendMarket’s research:
“Blockchain market size is expected to grow from USD 3.0 billion in 2020 to USD 39.7 billion by 2025, at a Compound Annual Growth Rate (CAGR) of 67.3% during 2020–2025”
MarketsendMarket
Such a promising market gathers more and more attention from the investors, so we want to underline the most successful of them.
the best DeFi startups to focus:
What is MakerDao
This DeFi startup was launched in 2014. MakerDao is one of the pioneers in the DeFi sector. It is an open-source platform based on the Ethereum blockchain, yet a decentralized autonomous organization at the same time. A specially developed mathematical system manages all aspects where the management rights are distributed throughout MKR token holders.
DAO governance layer ensures the efficiency and transparency of the system. The number of votes is proportional to the number of MKR tokens (Maker governance token) that the user sent to the voting contract address, DSChief. In other words, the more MKR tokens a user contributes, the more he influences the final decision.
Maker Protocol also allows the creation of digital currency and has its own stablecoin Dai, which is pegged to ETH as the only accepted crypto-collateral and is equal to 1 US dollar.
Find out our NFT platform development guide.
The system is regulated by unique smart contracts called CDP (Collateralized Debt Positions) where any user is allowed to generate Dai. Broadly, Maker protocol includes the following elements: Dai stablecoins, collateralized Maker vaults, oracles, and voting.
As the early DeFi protocol Maker has a very strong position on the market while DAI is one of the most reliable cryptocurrencies. Maker DAO is ranked as the second among all existing DeFi platforms according to DeFi Pulse.
What is Compound
Compound is another DeFi startup & Ethereum-based open-source protocol which creates the money markets for crypto holders. Other words, Compound is a lending platform.
Protocol algorithms automatically derive the interest rate based on the supply and demand and thus allows users to benefit from floating asset rates. Such a system helps suppliers or borrowers to avoid unnecessary negotiations about payment terms, interest rates or collateral.
The ability to act without additional intervention of counterparties (and pay their services) is one of the biggest advantages of DeFi in general. Each money market on Compound contains the full transaction record and is accessible for verification.
Generally speaking, Compound’s job is very similar to the traditional banking system, where you can deposit your fiat currency. As follows you earn a monthly or yearly rate while letting the others borrow your money through the bank institution as an intermediary party. With such protocols as Compound you can do the same action 24/7 and benefit from additional features of cryptocurrencies.
In comparison to the traditional financial system, where the return rate is around 0%, with the Compound mechanism users can earn 5-10% annually on average, which makes it definitely one of the top DeFi projects on the market.
What is AAVE
AAVE is a decentralized, non-custodial lending protocol that enables its users to lend and borrow digital assets and gain on the rate fluctuations.
AAVE also provides lending pools similar to Compound markets. Yet, the distinctive feature of AAVE was the introduction of flash loans (as the first protocol on the market). Flash loans make the user experience more convenient and let to earn even more.
The flash loans give the possibility of taking an immediate loan from one of the pools without any collateral. In order to guarantee the safeness of such transactions, the loan has to be returned in one block. Otherwise, all actions made with it will be banned and invalid.
Another greatness of AAVE is the ability to provide users with decentralized and secure crypto price data thanks to its integration with Chainlink oracle. This collaboration enables users to get accurate and on-time data from various on-chain and off-chain services. Thus, helps to ensure the reliability of the AAVE platform.
Thanks to its convenience and variability of useful features, AAVE has become favorable instantly and surely is one of the best DeFi security startups of this year. Since its recent launch in January 2020, the amount of assets held on this protocol has been growing by about 12 mils US dollars monthly. Read also our guide on how to prevent your smart contract from hacking.
What is Uniswap
Among all startups in DeFi, this one is one of the most popular. Uniswap is a big daddy of today’s DeFi. It stands for decentralized Ethereum based protocol which allows users to safely exchange ERC-20 tokens based on the AMM mechanism.
The distinctive feature of Uniswap is the lack of a traditional order book mechanism which has to determine the asset value. The whole workflow is maintained by smart contracts and AMM algorithms.
AMM is an automated market maker that counts the exchange rate automatically using the “constant product market model”. This allows to eliminate traditional order books and considerably faster the exchange process.
Haven’t really understood what the AMM is? Don’t worry, find this comprehensive guide on How the AMM technology works?
It basically works as an exchange for cryptos, yet in order to make any action, you have to provide your own liquidity to the protocol first. Uniswap gathers tokens into pools where users can carry out a needed transaction. Additionally, in Uniswap users are able to earn from providing liquidity to the pools.
Uniswap works similarly to stock markets and uses contracts that combine Ether and certain tokens into a pool. While exchanging Ether for a token, the Ether goes to a contract pool, and token returns to a user. Such a mechanism allows providing secure and faster exchanges due to lack of counterparty involvement and necessity to wait for matching with anyone for price specifications.
What is Curve.fi
Curve is a decentralized Ethereum based exchange. The mechanism here is similar to Uniswap, yet the idea is to change stablecoins only instead of Ether and tokens.
Find out more about What Stablecoin Is in this article
The same as Uniswap, Curve uses an AMM algorithm that does not require a sell order to be matched by other orders which makes the Curve fully automated. Yet, unlike Uniswap, Curve uses a slightly different type of “curve”. This helps to make autonomous exchanges 1:1 close rate with the approximate exclusion of slippage and minimal fees.
If you are fascinated about the AMM types but still a bit confused, we recommend looking into this article for more info.
Furthermore, the creators of Curve provided its users with the ability to earn on the liquidity put in the pools. The cooperation with other DeFis enabled getting the most profitable interest rate among certain chosen tokens. It is possible due to rebalancing the basic token while at the same time, keeping the main stablecoin for its owner.
Curve was the first protocol to provide a decentralized exchange for stablecoins which helped it to gather a lot of liquidity within a couple of months. Additionally, its unique pool balancing mechanism considerably reduces the slippage between the exchange rate which makes it resistant to such a big inconvenience as impermanent loss.
Find out more about common DEX problems and alternative solutions to them in this article.
What is Balancer
Balancer protocol was launched in March 2020 and is a representative of a young DeFis. Balancer is a crypto exchange protocol that works according to previously discussed automated market maker algorithms. Yet, it uses an alternative type of AMM named “constant mean market maker”.
Balancer is called among the best DeFi startups due to the number of distinctive advantages (like everyone else, it was developed as part of the development of a blockchain startup). In contracts to Uniswap it allows to trade against any existing token, not only ETH. The other thing is the ability to provide an unequal amount of tokens to the pool (like 60/40 or even 95/5), while keeping the mechanism balanced.
The user is able to monitor the pool’s trading volume and the presence of available pools in the pool management dashboard.
There is the ability to create three types of pool within Balancer protocol. The first type is a private pool that belongs to the one specified user. The owner is the only one who can provide liquidity to the pool, and further manage the pool parameters.
The second type is a shared pool where every user can join and become a liquidity provider. The pool parameters such as fees, tokens, weights are set in advance so the pool creators cannot really influence them. To track the pool ownership balancer protocol introduced BPT token.
The next type stands for smart pool and is similar to the private one, but is managed by the smart contract. It allows to adjust the pool parameters and accept liquidity from any protocol user.
Balancer’s main contribution is the introduction of flexible token swaps due to a unique market maker mechanism. Moreover, users do not benefit from the trading option only. They are able to earn profit and take part in protocol governing.
Having in mind a brilliant DeFi solution that will rock the market? Let’s discuss how to bring it to reality!
what is dY/dX
dYdX is a margin trading platform, a new DeFi startup, which provides the ability to spot trading, lending and borrowing of crypto assets. Tho, this is not just another decentralized exchange.
The problem before dYdX creation was that the margin trading was limited only to CEXs like Binance or Kraken. Therefore, the dYdX launch brought trading tools to another level.
dYdX does not use an AMM algorithm to enable trading options like previously discussed Balancer, Uniswap and Curve. It is based on the traditional supply demand model, yet the trading process is carried out by the smart contract. This allows for faster and non-custodial transactions between users.
dYdX stands on the best DeFi startups list because is currently shows one of the highest volume and liquidity flows within DEXs. Additionally, it offers very attractive lending options, like an automatic and immediate interest earning out of each produced block on Ethereum.
What is Synthetix
Considering the best projects in DeFi, it is worth mentioning this one. Synthetix opens derivatives for crypto DeFi. Synthetix is a decentralized protocol for synthetic token emission built by experienced token developers on the Ethereum blockchain. Currently, there are more than 30 synthetic assets representing commodities like gold (etc.), fiats and crypto currencies.
Those synthetic assets (Synths) can be created while providing ETH and Synthetix’s token SNX as collateral. Users can freely exchange Synths for other tokens as long as they are pure ERC-20 tokens.
All Synths have to be backed by SNX token with a Collateralization ratio equal to 750%. Holders are able to manage the ratio by burning or releasing Synths to achieve this. If users meet the required collateralization ratio they receive a weekly reward.
Synthetix also has its own DEX called Synthetix.exchange where users can trade synthetic cryptocurrencies, commodities, indexes and Forex.
The fees collected from Synths trading on the Synthetix exchange are distributed between SNX and synths holders. This works as an incentivization mechanism to emit (create) more Synths within the network.
Synthetix allows real-world assets to be traded on crypto markets. While started as a stablecoin, with the development of DeFi it became one of the biggest platforms for derivatives in crypto. Learn more about our NFT development services.
What is Kyber
Kyber is a decentralized exchange for cryptos. Unlike other exchanges where your exchange possibilities are limited to certain trading pairs against ETH, with Kyber you are able to buy and sell any ERC-20 token directly.
It also has its own token KNC (Kyber Network Crystal) in order to manage governance processes and incentivize protocol users.
Kyber exchange uses neither order books nor AMM model to establish the token price. There are currently more than 70 liquidity pools (called reserves) where users provide their assets in order to make a change.
Reserves are initially smart contracts that hold the money. In order to make a change, the protocol “checks” all the existing reserves to propose the best price of a certain token.
A distinctive advantage of Kyber is that the user is able to establish the price he wants to trade his asset. The network introduces a limit order, so you do not have to trade at the “current” exchange rate if you do not want to. You are able to wait until the desired price appears.
Kyber introduces a fast and considerably low-fees exchange for cryptos. While introducing the limit orders for trades Kyber helps to achieve the desired amount in return instead of admitting the current market price. Additionally, with the help of this feature the user will not lose custody of his crypto asset.
What is Dharma
And the last among the DeFi platforms that we will consider. Dharma creates a marketplace for lending and borrowing cryptos. As the first, it introduced Automated Clearing House (ACH) purchases in chosen US states.
Dharma is integrated with Uniswap V2 and allows lending and borrowing of all assets available there. Yet, Dharma does not only open the crypto to new users. It can be very beneficial for the old DeFi traders as long as it provides a variety of advantages like gas fees coverage for all users.
Moreover, thanks to ACH support, Dharma app allows DeFi trading directly from your bank account. At the moment of purchase, the bank will charge a 1.5% commission for each transaction. The maximum size of purchases is established for $25000 per week.
“Making an investment in DeFi has, up until now, been a bifurcated and highly technical process. Now, it’s as easy as downloading an app and connecting your bank account”.
Dharma’s CEO, Nadav Hollander
Summarizing, Dharma is a portal to a fast and easy DeFi for everyone. By installing an app, everyone can simply access crypto investment opportunities, which definitely makes this startup one of the best DeFi crypto projects ever.
Conclusion
We are extremely glad that blockchain technology has entered the financial market and brought such great initiatives like Dharma to life.
Dreaming of launching a cutting edge blockchain-based solution similar to those we have mentioned above? Then you will surely need a solid blockchain development company to implement your idea! Find some useful tips & advice on how to define reliable blockchain developers in this article.
It is worth noting that Uniswap has considerable superiority over other protocols. Its pioneer position on the DeFi market might be considered as one of the preconditions to such.
Read Also: Top 10 Blockchain Development Companies
Yet, Uniswap’s competitors have found a big place for growth and development in its partial inconveniences and loops. The detection and willingness to eliminate those have contributed to the invention of a list of other protocols.
Along with market augmentation, the number of projects concentrating on DeFi will also grow. We hope this list of the top DeFi startups for 2023 will give you a basic understanding of the sector or would trigger the creation of your own DeFi!
If you already have an idea in mind, do not hesitate to contact Blaize for further discussion!
Frequently Asked Questions
Can you help me realize a DeFi startup idea?
Sure. Our team specializes in blockchain development, which includes creating blockchain protocols, ecosystems, dApps, smart contracts, and much more. So if you have an idea of a blockchain-based startup, we’ll be happy to help. And if you don’t have the concept yet, we can help you refine your idea and create the most suitable and efficient business logic.
Contact our team to find out more about our services and discuss your DeFi startup.
How do I create a successful DeFi project?
The success of your project depends on many factors, including the concept of the product, its business logic, tokenomics model, and technical implementation.
Here at Blaize, we can help you develop a highly secure product that would follow industry best practices and attract users. Additionally, we can consult you on the business logic of your project and make sure that it’s created in the most efficient way.
Should I hire in-house experts or outsource DeFi startup development?
It depends on your long-term goals. If you need to create a secure and efficient DeFi product fast, it’s easier to hire an outsourced team like Blaize. This way, you’ll be able to save time, cut costs, and ensure high quality of development.
Yet, if you are planning on creating a full ecosystem of products, hiring an in-house team might be more beneficial.