DeFi tokens, such as Uniswap, had a huge effect on the markets and reached their highest values yet. Most DeFi projects are hosted on the Ethereum blockchain. According to Coindesk,"DeFi now defines Ethereum." These projects work through decentralized applications (DApps). In this article, Bybit takes a look at the best DApps on the market as we move into 2021.
What is a DApp?
A decentralized application (DApp) is a software application that works on a blockchain. Unlike internet-based applications, they don't need a centralized database to function. They work on Ethereum, but they also work on other blockchain development services that run smart contracts, such as EOS and TRON.
Some in the financial industry foresee that DeFi DApps will cause a revolution, because they will allow people to conduct financial business in a fully decentralized manner and without intermediaries. So what are the best DeFi DApps on the market? This is our list of the top ten DApps.
Called the "Godzilla of DeFi" by Coindesk,MakerDAO has been around since Ethereum was launched in 2015. It is a lending platform where users can borrow thestablecoinDAI, which is anchored to the US dollar.
The key to DAO's success as a lending platform has been its decentralization.
As with all DApps, MakerDAO has no borders.
Anyone in the world can use it. No one is subject to credit or identity checks, just as it would work if they used a loan service from a bank. The DAI uses cryptocurrency development services as collateral, mainly ETH or some Ethereum-based tokens (ERC-20), including BAT.
This cryptocurrency is blocked until the user is ready to repay the loan and any other commissions he or she is owed.
Once they do this, the ETH is released. However, when the price of ETH drops to a certain point, it will be sold to pay off the DAI that was borrowed plus any other penalties. These liquidations or the threat of them help stabilize the MakerDAOsystem.
Uniswap is a decentralized exchange (DEX) that allows anyone to participate in ERC-20 token transactions without the control of a central body or intermediary. It provides permissionless access to financial services, staying firm to the decentralization ideals of the Ethereum blockchain. As Uniswap is based on the Ethereum Blockchain development services with the use of smart contracts,it replaces the functions of traditional exchanges.
For example, order books are replaced with proprietary automated liquidity reserves executed by algorithms. These liquidity reserves are PAIRS of ETH and ERC-20 token that are exchanged between traders. At Uniswap, users are incentivized to provide liquidity to these reserves with a portion of the trading fee.
Compound is another loan DApp built on the Ethereum blockchain. It allows users to lend and borrow cryptocurrencies from other users. Everything works using the smart contract protocol. On the other hand, lenders can earn interest on their cryptocurrency development services by adding them to the liquidity reserve. To do this, users must first connect an Ethereum wallet, such as MetaMask.
The tokens used in Compound are called cTokens. So if a user deposits ETH, they will receive cETH in return. With the same concept, if a user deposits USDT, they will receive cUSDT in return.
The interest of each token will vary depending on the supply and demand of native Cryptocurrency development company. However, in general, it will still be higher than the interest offered by a savings account. Like other DApps, Compound has the advantage of not requesting identity verifications and offering lower transaction fees.
Curve is a DEX that quickly gained popularity in late 2020 and became one of the most used DApps by volume worldwide. Like Uniswap, it uses automated liquidity reserves. However, unlike Uniswap, it is explicitly designed to exchange stablecoins and bitcoin-backed ERC-20 tokens such as Wrapped Bitcoin (WBTC). Therefore, as maintenance costs are lower, so are commissions.
Its interface is not what would be called typical, but it could well be a deliberate tactic. Curve is not designed for the typical user as its use is very specific. Therefore, there are not many investors or traders who want or need to exchange stablecoins.
Although the creators of Curve argue that the scarcity of assets that can be exchanged increases their operational efficiency, the fact that only stablecoins (and bitcoin-backed ERC-20 tokens) can also be exchanged can also be a disadvantage from a user's point of view.
dYdX is another DEX based on the Ethereum blockchain. However, unlike other DEXs, in dYdX you can lend, borrow and trade cryptocurrencies on margin. There are two types of margin trading available: isolated and crossed. Currently, there are three trading pairs available on the platform: ETH/DAI, ETH/USDC and DAI/USDC.
In addition to margin trading, users can lend assets to accumulate interest and trade the assets normally. There are some minimum miner and taker commissions to trade.
As with other DApps, the risk to the lender is low due to over-guarantee. To take loans, the minimum collateral ratio in dYdX is 125%.
Aave is another lending DApp built on the Blockchain development services where users can lend assets and earn interest in the process.In one mode, it is similar to Compound.
However, Aave stands out from the rest thanks to an additional function: instant loans (flash loans).
In practice, instant loans are loans valid only for a blockchain transaction. It allows you to take on unsused debt. How is this possible?
This is possible because the transaction is reversible at any time if the loan is not repaid.
Assets for instant loans originate from smart contract reserves. Interest rates on Aave for instant loans are low, only 0.30%.
7. Yearn Finance (YFI)
Yearn Finance is one of the new figures on the scene: it launched in July 2020 and quickly became one of the most popular DeFi DApps. It is a yield aggregator that does virtually all the work for you in yield farming. It automatically searches for the DeFi DApps on the Ethereum blockchain for the best return earnings.
The YFI token had a considerable increase in price after its launch. After a launch price of $739 in July, the price quickly skyrocketed to $43,000 in September. Analysts believe it's due to the great trust that people involved in the DeFi space have in Yearn Finance, which has a growing range of products.
The main product is vaults, where users can deposit their cryptocurrencies and get return in return.
Synthetix allows users to speculate on the price of real-world assets, such as other crypto assets, currencies, stocks, and precious metals (among others), using ERC-20 tokens. These tokens, known as synthetic assets or "synths," can record the prices of these assets.
As with Maker DAO, in which users must lock ETH as collateral to create the DAI stablecoin, To acquire real-world information about the asset's price, Synthetix partnered with Chainlink and its oracle technology to provide decentralized pricing information.
So far we have talked almost exclusively about Ethereum-based DApps, but it would be unfair if we did not talk about others. Newdex is the first DEX based on the EOS blockchain. As of December 2020, it is the most popular EOS-based DApp by volume. It also operates on the TRON blockchain.
Like other DEXs, Newdex does not require Know Your Client (KYC) verifications or access to client funds.
However, this could change after Ethereum 2.0 is fully implemented. Nonetheless, Newdex is an excellent choice for users looking for alternatives outside of Ethereum.
Marketed as "your global, limitless betting platform," Augur allows users to bet on a wide range of real-world events, such as sports, economics, and elections. It raised 2,000 BTC and 100,000 ETH in an Initial Coin Offering (ICO) in 2015.
The essence of Augur is the marketable tokens known as Reputation (REP). These tokens can be used to bet, dispute the outcome of a bet, and buy participation tokens. Reputation is a suitable name for these tokens, as they can be received for having been right about a disputed bet. They can also be received by buying them or providing information about a bet.
As DeFi continues to grow, DApps will inevitably have more and more prevalence. They have clear advantages over conventional applications, such as the fact that they never have downtime, users have full control over their funds, and have ultra-low transaction fees.
In addition, as cryptocurrencies are used more and more, there is no doubt that people will be more attracted to accept cryptocurrencies as a means of payment. With DApps like Uniswap, they can be used to receive a passive income.