The recent spike in demand for decentralized monetary technology suggests that the investment landscape has suddenly grasped the importance of such protocols and the possibility of a complete upheaval of legacy financial systems. In just under a month, there was a doubling of the total value of assets locked (TVL) in the DeFi market from $1 billion to $2 billion. Likewise, the users base of the budding ecosystem recorded similar growth patterns that cement its place as a hub for profitable projects.
According to data from various DeFi metric systems, the lending sector has been the main driver of DeFi’s emergence in mainstream consciousness. Up until the time of writing this piece, lending DeFi protocols account for a large chunk of market growth. The first and second most valuable DeFi platforms contribute over 50% of the market’s value. While this is a given, it does not take anything away from the opportunities brewing in other DeFi sectors. Unique financial tools like the perpetual futures platform introduced by dYdX are driving new paradigms in the nascent DeFi ecosystem.
Currently, the performances of DeFi tokens continue to outpace established cryptocurrencies, in what connotes a critical shift in the crypto market dynamics. As such, it has become necessary to identify those DeFi projects with enough innovative edge and market visibility to generate mouthwatering returns to investors. In this piece, I will highlight 5 DeFi projects that can generate impressive returns on investments.
The success trailing Compound’s recent rise to the pinnacle of the DeFi market is one that shows the growth potential of protocols entrenched in decentralization. This DeFi lending application has surpassed expectations and emerged as one of the juggernauts of the DeFi ecosystem. For one, the launch of its governance token gave credence to the platform’s commitment towards progressive decentralization and highlighted its viability. Although this project has been operational for a while, it was not until recently that we began to see it generate the sort of hype potent enough to drive long-term growth.
The factor fueling this success is how Compound navigates the hurdles prevalent with traditional banking and borrowing systems. Apart from allowing lenders to earn impressive returns and providing funds to borrowers with collaterals, the platform has found a way for users to generate interest on funds locked on the platform and, at the same time, have access to instantly trade, spend, and transfer such earnings on other applications. And so, this project possesses the sort of innovative edge valid enough to sustain and surpass recent market performance.
PlutusDeFi is one of the most intriguing additions to the already loaded DeFi market. It creates a universal interface for multiple DeFi protocols while preserving the anonymity and the privacy of users. As such, PlutusDeFi is a full-stack aggregator compatible with a wide array of DeFi protocols. It even goes as far as enabling a bridge between Cefi systems and the decentralized landscape. An in-depth analysis of the functionality of this platform shows that it deftly aggregates DeFi lending, insurance, and privacy by implementing plugins for platforms and projects like Compound, dYdX, Nexus Mutual, Aztec, Open VPN, Tor network, and a native Plutus ETH Bl3nd3r (Blender).
Furthermore, it plans to provide a Cefi to DeFi bridge by integrating with Lipisha, Vodacom (a publicly listed company in South Africa), and M-Pesa, one of the largest telecom firms in Africa. With these integrations, users can deposit mobile money on DeFi lending applications. As expected, the impressive functionalities of PlutusDeFi have attracted the interest of hedge funds and investors. Firms and individuals that participated in its latest round of funding include NGC venture, Blockchange Capital, Danish Choudhury, CEO of Bitcoin.com Exchange, Ethereal Capital, Eric Benz, CEO of Changelly, Sean Klingosum, the Managing Partner at Torchlight Ventures, and Thibaut Denonain, Head of Trading at Goldbaum & Partners. Likewise, two major academics, Paolo Tusca and George Samman, both experts in the financial industry, recently joined the platform’s pool of talent to identify viable ways to integrate the platform with centralized applications.
Like Maker and Compound, Kava focuses on enabling a decentralized ecosystem where users can instantly lend and borrow funds. However, the differentiating factor that sets it apart is that it has found a way to infuse cross-chain capabilities that let it support a wide array of crypto assets. As such, the platform is not restricted to the Ethereum market as its protocol integrates with four different digital assets, including BTC, XRP, ATOM, and BNB. In contrast to the design of Compound and Maker that restricts their growth potentials to the Ethereum community, the modality of the cross-chain approach exposes Kava to a large pool of crypto asset holders and provides ample room for success.
Interestingly, Kava is yet to attract the level of market visibility attributed to Compound or Maker. And this presents a unique set of opportunities to investors who are looking to invest in hidden gems and watch them take off.
Maker established the blueprint for DeFi-based lending and borrowing protocols. Before the introduction of this project, crypto collateralized loans used to be a tricky endeavor because of the volatile nature of digital assets. However, by infusing elements of stability through a stablecoin, Maker has successfully developed a way to easily borrow crypto and also reliably predict the amount to be repaid. The liquidation system of the platform ensures that the value of borrowed assets does not fall below the valuation of the collaterals locked on the smart contract-enabled protocol. Therefore, the network provides various checks and balances to ascertain that its offering remains decentralized and stable.
Due to the success of this blueprint, Maker has become one of the core entities in the DeFi ecosystem. It boasts the second-highest TVL in the market and is arguably the most engaged decentralized lending infrastructure.
Aave, previously known as ETHLend, has created new narratives in the lending sector that has helped it carve out an active community of users. The platform offers a rate-switching feature that allows borrowers and lenders to choose between fixed or variable interest rates. Likewise, in addition to the popular collateralized lending systems prevalent in the DeFi market, Aave also offers flash loans that do not require any collaterals.
These unique functionalities have projected the platform as one of the most innovative decentralized financial systems we have today. Already, it is currently the fourth most valuable DeFi protocol and has the tendencies of disrupting current rankings.