Blockchain based startups have been leading the way in recent years. As there is no potential to limit, according to the Grandview Research, blockchain market is predicted to reach to over 7.5 billion by 2024. Yet, if previously blockchain technology was mainly oriented on digital payments and bitcoin transactions, in particular, nowadays distributed ledger technology has aim to integrate with traditional financial system as well.
With the creation of stablecoin, decentralization of financial market has become irreversible. Moreover, DeFi sector is now one of the fastest developing trends with ambitious to grow even greater. Here, we have prepared a list of 5 successfully implemented DeFi startups.
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 that ensure efficiency and transparency of the system. The number of votes is proportional to the number of MKR tokens that the user sent to the voting contract address, DSChief. In other words, the more MKR tokens 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. 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 following elements: Dai stablecoins, collateralized Maker vaults, oracles, and voting.
Compound is an another Ethereum based algorithm-driven open-source protocol which creates the money markets or, other words, pools of assets. Protocol algorithm automatically derive the interest rate basing on the supply and demand and thus allows users to benefit from floating asset rate. Such system helps suppliers or borrowers to avoid unnecessary negotiations about payment terms, interest rate or collateral and to act without additional intervention of counterparties. Each money market contains the full transactions record and is accessible for verification.
Generally speaking, Compound’s job is very similar to traditional banking system, where you can deposit your fiat currency and earn a monthly or yearly rate while letting the others to borrow this 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.
AAVE is a decentralized, non-custodial lending protocol which enables its users to lend and borrow digital assets and gaining on the rate fluctuations. Landing poll of AAVE consists of multiple reserves represented by different digital currencies and has Ethereum as a total liquidity.
Unlike the previous example, AAVE creators introduced some significant updates to the system such as flash loans what makes user experience more convenient and let to earn even more. The flash loans give user the possibility of taking an immediate loan from one of the pools without any collateral. In order to guarantee safeness of such transaction the loan has to be returned in one block or otherwise the all actions made with it will be banned and invalid.
Another greatness of AVEE is the ability to provide users with decentralized and secure crypto prices 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 which helps to ensure the reliability of AVEE platform. Thanks to its convenience and variability of useful features, AAVE has become known and favorable instantly. Since its recent launch in the January 2020, the amount of assets holded on this protocol has been growing for about 12 mils US dollars monthly.
Uniswap is a decentralized Ethereum based protocol which allows users to safely exchange ERC-20 tokens using the “constant product market model”. It basically works as an exchange for cryptos, yet in order to make any action you have to put the liquidity.Using smart contracts, Uniswap gather tokens into pools within which a user can fulfil his transactions. Users can exchange tokens or add them to the pools in order to earn the commission.
The greatest feature of Uniswap mechanism is that it does not use a traditional order book to determine the asset value, unlike ordinary exchanges. Uniswap works similarly to stock markets and uses contracts which combines Ether and certain token into a pool. While exchanging Ether for token, the Ether goes to a contract pool, and token returns to a user. Such mechanism allows to provide a secure and faster exchanges due to lack of counterparty involvement and necessity to wait for matching with anyone or price specifications.
Curve is a decentralized Ethereum based exchange. The mechanism here is similar to Uniswap, yet the idea is to change stablecoins instead of Ether and tokens. The same as Uniswap, Curve uses a market-making algorithm which does not require a sell orders to be matched by other orders and makes the Curve fully automated. Therefore, special algorithm of Curve allows its users to make autonomous exchanges 1:1 close rate with approximate exclusion of slippage and minimal fees.
Furthermore, the creators of Curve provided its users with the ability to earn on the liquidity put in the pools. The cooperation with earlier discussed Compound enabled getting the most profitable interest rate among certain chosen tokens while rebalancing the basic token but, at the same time, keeping the main stablecoin for its owner. In comparison to traditional financial system, where the return rate is around 0%, with the Curve-Compound mechanism user can earn 5-10% annually on average, what makes it’s definitely worth a try.