DeFi, DEX, Open Finance

DeFi – top 5 projects to invest in for the long run

If you have been following CryptoTT, you already know of the $4.5 billion of assets recently poured into an emerging industry called DeFi (decentralized finance). The industry is growing at over $500 million per week. 

So, what exactly is DeFi and why is it important? Check out our article on Decentralised Financing, Decentralised Exchanges and Open Finance HERE.

The following companies are leading the pack and have garnered the attention of leading investors, product builders, and blockchain stakeholders.

1. Maker

DeFi Maker Explained 

MakerDAO is a decentralized DeFi credit platform on Ethereum that supports Dai, a stablecoin whose value is pegged to USD. Anyone can use Maker to open a Vault, lock in collateral such as ETH or BAT, and generate Dai as debt against that collateral. Dai debt incurs a stability fee (i.e., continuously accruing interest), which is paid upon repayment of borrowed Dai. That MKR is burned, along with the repaid Dai. Users can borrow Dai up to 66% of their collateral’s value (150% collateralization ratio). Vaults that fall below that rate are subject to a 13% penalty and liquidation (by anyone) to bring the Vault out of default. Liquidated collateral is sold on an open market at a 3% discount.

Holders of Maker’s other token (MKR) govern the system by voting on, e.g., risk parameters such as the stability fee level. MKR holders also act as the last line of defense in case of a black swan event. If system-wide collateral value falls too low too fast, MKR is minted and sold on the open market to raise more collateral, diluting MKR holders.

Maker also has a feature called the Dai Savings Rate (DSR). DAI holders can lock their DAI into Maker’s DSR contract and earn a variable interest rate in DAI, which is generated from stability fees.

How to use Maker

The most popular place to use MakerDAO is Maker’s Oasis Portal. There you can open and manage Vaults, review your Vault’s history, deposit DAI into the Dai Savings Rate, and get up-to-date stats on the whole Maker system. 

Conclusion on Maker

Maker currently holds a 30% dominance on the DeFi Network. Maker is currently down from it’s all time high of 4ETH to 1.4ETH, which is the closest it will get to its lowest price and we at CryptoTT believe that this can be one of the best investments you can make at the moment for the years to come.

2. Compound

DeFi Compound Explained 

Compound is an algorithmic DeFi money market protocol on Ethereum that lets users earn interest or borrow assets against collateral. Anyone can supply assets to Compound’s liquidity pool and immediately begin earning continuously-compounding interest. Rates adjust automatically based on supply and demand.

Supplied asset balances are represented by cTokens: representations of the underlying asset that earn interest and serve as collateral. Users can borrow up to 50-75% of their cTokens’ value, depending on the quality of the underlying asset. Users can add or remove funds at any time, but if their debt becomes undercollateralized, anyone can liquidate; a 5% discount on liquidated assets serves as incentive for liquidators.

The Compound protocol sets aside 10% of interest paid as reserves; the rest goes to suppliers. Compound initially launched on mainnet in September 2018 and upgraded to v2 in May 2019. The protocol now supports BAT, DAI, SAI, ETH, REP, USDC, WBTC, and ZRX. Compound has been audited and formally verified. As of May 2020, Compound has transitioned to community governance; COMP token-holders and their delegates debate, propose, and vote on all changes to Compound.

How to use Compound

The best place to use Compound is the native interface. Just enable any asset to start supplying or borrowing it. You can also check your balance and current interest rates.

Conclusion on Compound

Compound currently has over $800 Million locked into it. It is currently down from it’s all time high of 1.62ETH to 0.36ETH. We at CryptoTT believe that Compound is bound to bounce back and is a very lucrative asset to get into for the long run.

3. Synthetix

DeFi Synthetix Explained

Synthetix is a decentralized DeFi platform on Ethereum for the creation of Synths: on-chain synthetic assets that track the value of real-world assets. Born as stablecoin project Havven, Synthetix rebranded and expanded its scope prior to launching on mainnet in February 2019. As of March 2020, the Synthetix platform supports over 30 Synths representing fiat currencies, commodities (e.g., gold), and cryptoassets. Stocks, indices, and other derivatives are planned.

Synthetix has a native token called SNX. Holders can lock in collateral such as SNX and ETH to mint Synths, which are freely tradeable ERC20 tokens. Transaction fees from Synths exchanged on Synthetix’s non-custodial DEX (Synthetix.Exchange) go to SNX holders/Synth minters, incentivizing Synth creation and giving value to the underlying collateral (i.e., the SNX token).

How to use Synthetix

The best place to interact with the Synthetix Network is Mintr, where you can mint and burn Synths, collect fees, and more.

Conclusion on Synthetix

Synthetix is currently down from it’s all time high of 0.0274ETH to 0.0112ETH. We believe that it has not yet reached its full potential and it is important to keep an eye on it. If it goes anywhere between 0.0030ETH or 0.0040ETH, make sure to add it to your portfolio.

4. Aave

DeFi Aave Explained 

Aave (from the Finnish word for “ghost”) is an open source DeFi non-custodial protocol on Ethereum for decentralized lending and borrowing. For lenders, the protocol mints ERC20-compliant aTokens at a 1:1 ratio to supplied assets. Interest immediately starts compounding continuously, represented by a steady increase in the amount of aTokens held by the lender. This interest stream may be redirected to any address, separate from the aTokens that represent the underlying principal.

Users can borrow against most supplied assets; the collateralization ratio and liquidation threshold depends on the asset, as does the liquidation penalty, which anyone can get as a bonus for liquidating an unhealthy loan. Interest rates adjust algorithmically based on supply and demand, but Aave lets borrowers opt in to and out of (at any time) a stable rate that changes less often. The protocol keeps a liquidity reserve to ensure withdrawal at any time.

Aave offers flash loans: trustless, uncollateralized loans where borrowing and repayment must occur in the same transaction. Aimed at developers, this feature could lead to innovative uses of DeFi. Aave’s native governance token is LEND; the only fees are 0.25% of originated loans and 0.09% of flash loans; these go toward burning LEND, rewarding lenders, and compensating affiliates.

Launched in Nov. 2017 as P2P lending project ETHLend and rebranded to Aave in Sept. 2018, the protocol went live on mainnet in Jan. 2020 with 16 supported assets (13 can be used as collateral). Aave’s code has undergone two external security audits, and Aave maintains a bug bounty program.

How to use Aave

To start using the Aave protocol, head over to the native web interface, app.aave.com. After you connect your Ethereum wallet, you can click on the Deposit and Borrow links to see which assets in your wallet are supported and the current interest rates for all assets on Aave. If you’re a developer interested in trying out flash loans or building on the Aave protocol, you can start getting up to speed by reading through Aave’s developers docs.

Conclusion on Aave

The Aave token is called LEND and currently it is at 0.00097 ETH. The all time high for LEND is 0.00159. We recommend that you get it if it hits 0.00064ETH. LEND is here to stay and it is vital that you try out their deposit and borrow functions, it is even more important to get in it while it’s down and undervalued. 

5. Uniswap Explained

DeFi Uniswap Explained

Uniswap is a fully decentralized DeFi on-chain protocol for token exchange on Ethereum that uses liquidity pools instead of order books. Anyone can quickly swap between ETH and any ERC20 token or earn fees by supplying any amount of liquidity. And anyone can create a market (i.e., liquidity pool) by supplying an equal value of ETH and an ERC20 token. Uniswap allows only one market per ERC20 token. The market creator sets the exchange rate, which shifts through trading due to Uniswap’s “constant product market maker” mechanism. When trading reduces one side of the pair’s liquidity relative to the other, the price changes. This creates arbitrage opportunities, encouraging more trading.

Uniswap has no native token, but each liquidity pair is represented by a unique, freely-transferable ERC20 token. All fees (0.3% per trade) are added to the relevant liquidity pool; thus all fees go to liquidity providers in proportion to their share of the pool’s liquidity. Liquidity providers can add to or withdraw their funds at any time.

With larger price changes, liquidity providers suffer an “impermanent loss.” The loss diminishes as prices return to their level at the time liquidity was supplied. With sufficient trading volume, fees earned may offset this loss.

How to use Uniswap

The main Uniswap interface is the best place to swap tokens, create a market, or manage your liquidity pool. You can also see your token balances, current exchange rates, and your share of the liquidity pool. For more information about Uniswap check our guide HERE.