The future of DeFi and the world’s first fully decentralized derivatives exchange
This summer in the crypto industry is nothing but a DeFi summer. It is difficult to imagine anyone interested in crypto who would not have heard of the general hysteria around Decentralized Finance. We’ve seen the launch and growth of dozens, if not hundreds, of projects that collectively have greatly enhanced the decentralized finance network. The intuitive interfaces and the declared high return on passive investments have led to an enormous increase of funds blocked in the DeFi ecosystem — over $6 billion to date with a continuous $500 million weekly growth. We also saw the introduction of a number of new unique products. But being new and well thought out at the same time is rarely the case, and many of DeFi’s key flaws remain unresolved. In today’s article, we’ll discuss the best DeFi projects to look out for in the second half of 2020.
Leaders to attract the attention of investors and developers
DIA (Decentralized Information Asset) is an open-source Swiss non-profit blockchain project that aims to implement transparent data and open access oracles. Within the DeFi ecosystem, DIA is overseen by a decentralized community of DIA token holders and their representatives. The DIA governance token acts as an incentive for key market participants.
DIA is set to become an open-source Bloomberg for cryptocurrencies and financial data. DIA was one of the most anticipated DeFi projects, as confirmed by the incredible buzz during the August 3rd sale. Now the DIA token is trading almost 60 times higher than its initial price. The project is supported by renowned investors such as Outlier Ventures.
Orion Protocol (ORN) entered the market as the first Dynamic Coin Offering (DYCO) and became one of the hottest offerings in 2020. Orion builds B2B and B2C solutions based on the most advanced liquidity aggregator ever developed under the leadership of CEO Alexei Koloskov, an experienced blockchain developer and creator of the Waves decentralized exchange.
Orion has signed partnerships with Elrond Network, Bitmax, MXC, and Acheron. Since its launch on Kucoin and Bitmax, almost 33% of ORN’s original offering has been contributed to the pre-staking program. The token showed 70x growth at its peak and is now trading at around 40x.
Compound was one of the first companies in the current DeFi hype cycle to gain massive attention as their native COMP token surged in value before correcting to current levels. Compound is a money market protocol that allows users to earn interest or borrow assets against collateral, all executed on the Ethereum blockchain.
The process of filling the Compound’s liquidity pool is relatively straightforward, allowing everyone to start earning compound interest right away with rates that automatically adjust based on supply and demand. The number of assets blocked in Compound has grown more than 7 fold in 2.5 months and is now equivalent to 760 million dollars.
One of the most exciting projects, Yearn Finance, hit the scene in July when their native YFI token experienced dizzying growth thanks to a limited supply based on exclusivity originally reserved for liquidity providers (farmers). Yearn acts as a decentralized ecosystem for aggregators that use lending services, allowing members to host tokens such as USDC, DAI, and USDT to participate in Yearn’s selection of the most lucrative lending opportunities.
The company is led by developer André Cronier, who started off with the idea of democratizing DeFi. There was no pre-mining, pre-sale, or funds distribution among team members, which means that most of the YFI tokens are owned by the community. Since the beginning of August, YFI has doubled in size. It will be interesting to see how the token behaves in the coming months.
Backed by Synthetix, dHedge is popular with leading investors such as Blocktower Capital and Three Arrows Capital and has developed a new protocol for decentralized asset management that seeks to democratize trading. The company recently announced that it would exit the stealth mode.
With the Synthetix zero-slippage trading model and an expanding group of supported assets, dHedge is offering new ways to leverage derivatives liquidity provided by the Synthetix protocol. Synthetix currently allows users to mint, store, and trade a variety of asset-based derivatives, including cryptocurrencies, fiat currencies, and commodities. Stay tuned for the official launch of dHedge.
Uniswap is one of the driving forces behind the current bullish DeFi campaign. Acting as a decentralized exchange, Uniswap differs from other DEXes by utilizing incentivized liquidity pools instead of order books. Users who choose to provide liquidity are rewarded with a percentage of the fees paid for each transaction using Ethereum.
Uniswap currently holds over $170 million in liquidity pools and hundreds of new listings per week. For novice users, there is a learning curve to using Uniswap as it is powered by connected external ERC-20 wallets used to trade assets and provide liquidity. There are also slippage and volatility considerations that should be taken into account before diving headfirst into Uniswap.
Launched in early 2020, Curve allows users to trade between stablecoins while providing low slippage and a low commission algorithm designed specifically for these types of assets. Curve was one of the earliest proponents of profitable farming and currently offers 7 pools where users can stake stablecoins in order to receive rewards such as new currencies. There is currently over $1 billion locked in Curve pools, up from $15 million as of June 1, 2020.
With its simple interface, Curve is one of the most popular DeFi platforms and has been praised for its user-friendly features and transparent documentation. The company has been actively supporting other DeFi projects in recent months. The team recently decided to issue its own token to manage the platform. The ticker already known to many is CRV. Binance, OKEx, and other exchanges promptly listed the token, and the price at the moment reached $50 while it was originally estimated at 10 cents.
With nearly $1.5 billion in assets, Maker DAO is arguably the most recognized name on this list, and for a good reason. The decentralized lending platform supports DAI, a stablecoin pegged to the US dollar, and one of the most popular stablecoins in the cryptocurrency industry. Maker DAO allows anyone to open a vault, block cryptocurrency collateral, and generate DAI against that collateral.
According to DeFi-Pulse, Maker dominates other projects in the sector at 23.1% in terms of the assets blocked.
Aleph.im is one of the hottest newcomers to the DeFi arena in the last couple of months. Aleph is a chat protocol for machines where the blockchain works as nodes for decentralized computing power and storage. The public cloud market is expected to reach around $374 billion in 2020, and surpass $520 billion by 2022. Amazon’s AWS currently leads the market, but the demand for decentralized solutions has never been greater.
A testament to Aleph.im’s success is that their website is online right now. Aleph will also be listed as one of the partners in the highly publicized Serum project, the world’s first fully decentralized derivatives exchange (see below).
Most recently, leading crypto derivatives exchange FTX, partnered with the Solana team to announce the Serum project, the world’s first fully-fledged decentralized spot and derivatives exchange operating on the centralized limit order book (CLOB) on the Solana network. The upcoming DEX will seek to capitalize where others have failed by providing reliable cross-chain commerce at the speed and price customers are asking for. And despite being built on Solana, it will be compatible with Ethereum. As we know, most DeFi protocols end up reaching out to a centralized oracle — often the most critical point, but this is not the case with Serum.
Serum differs from the others, and this is its strength. Its software allows for fast DEX trades; it supports cross-chain, stablecoins, wrap for BTC, BCH, BSV, LTC, ZEC, ETH, and ERC-20 tokens, order books and the ability to create your own and new financial products. At the same time, it is completely decentralized. There are no oracles with centralized price channels; no tribunals on whose integrity you must rely. Serum is pure DeFi. Unlike current DeFi products, it’s fast and cheap. The architecture is tuned to support node operators with incentives to stake through SRM inflation, trade commissions, and a delegation/referral system called “leaders.”
SRM token is the backbone of the Serum ecosystem on the native Solana infrastructure (SPL token) with cross-listing as an ERC-20 standard, the token will be fully integrated into Serum. On August 7, an IEO was held on the FTX and Bitmax exchanges, and on August 11, a listing was made on many major exchanges, including Binance. At the moment, the token is traded 17 times higher than its initial price.
In addition to the mentioned Solana and FTX, Serum’s partners include such well-known companies in the crypto industry as 3Commas, Akg Ventures, Certus One, Genesis Block, and others. Many of them are also Serum validators. According to the founders’ forecasts, the full launch of the Serum exchange should take place within a few weeks.
Decentralization is the future of finance
Against the backdrop of the global health and economic crisis, the popularity of DeFi projects has increased, which has led to the emergence of new institutional and individual players on the market. The cost of DeFi tokens has grown by hundreds of percent since the beginning of the year. The opportunities for startups using this technology are endless, which holds great promise for the diversification and growth of the DeFi ecosystem. New groundbreaking DeFi products are emerging, built at less cost, and ready to hit the mainstream market.