Top DeFi Platforms 2021

Cryptocurrency obligates to make money and payments accessible universally. Decentralized Finance, in short DeFi, adds to this obligation and promises access to a globally open alternative to financial services such as savings, loans, trading, insurance, etc.

top-defi
Top DeFi

What is DeFi?

Decentralized Finance or Open Finance is a blockchain-based ecosystem of financial applications that is not dependent on central financial mediators like brokerages, exchanges, or banks to offer monetary contracts between parties and uses smart contracts (computer programs or transaction protocols) on public blockchains. DeFi creates a transparent and permissionless system without any central authority. The biggest advantage of DeFi is that it enables everyone to access financial services especially those who otherwise do not have an approach to financial services because of different reasons such as lack of funds, isolation, political or social oppression, etc. DeFi applications on blockchains develop new financial markets, products, and services. Moreover, DeFi offers fast transfers and reduced fees.

What are Decentralized Applications (DApps)?

Decentralized applications (DApps) are software applications that function on a blockchain network (a spread-out computing system). Unlike traditional apps, DApps’ backend code is hosted on a P2P decentralized network like Ethereum, and not on a centralized server. DApps are applicable to several online industries.

Functions

DApps users can:

  1. Lend or borrow funds
  2. Go long or go short on various assets
  3. Trade coins or earn interest directly without any intermediary

DApps Pros and Cons

DApps Pros

  • Open Source

DApps’ original source code is freely available and can be used, redistributed, verified, copied, and modified

  • Decentralized

DApps are not controlled by any single authority because they run on blockchain networks.

  • Cryptographically Secure

DApps are secured by cryptography. A public blockchain records and holds all the data. It is very expensive and almost impossible to attack the whole network.

  • No Subscription

On DApps, there are public and private keys to access data, so there is no need for subscription or registration

  • Direct Transactions

Transactions on DApps occur without any help of a third-party financial operator

  • Privacy

DEXs function without any central entity, so they do not need any sign-up process and KYC/AML requirements.

DApps Cons

  • Difficult to Build

It is very difficult to build DApps because they need complex protocols to get agreements

  • Difficult to Update

As building DApps is difficult, the same is the case with their updating. Updating and fixing bugs on DApps is very complex and arduous.

  • User Identity

Users’ identities cannot be verified because DApps have no central authority.

Decentralized Exchanges

The popularity of Decentralized Exchanges (DEXs) is increasing with the blazing hype of DeFi products. Although the majority of crypto exchanges are still centralized, it is said that the future of crypto exchanges is fastened to DEXs.

What is a Decentralized Exchange (DEX)?

In simple words, a decentralized exchange is a P2P non-custodial marketplace to connect digital currency buyers and sellers. It is non-custodial in the sense that there is no central authority to keep the digital asses safe. The users control their transactions on an automated ‘trustless’ system. On DEXs, all trading occurs by interacting with smart contracts.

Difference Between Centralized Exchanges (CEXs) and Decentralized Exchanges (DEXs)

  • Control

CEX – Platform controls

DEX – Users control

  • Speed

CEX – Orders execution in milliseconds

DEX – Orders execution takes place in minute(s)

  • Security

CEX – Security perils like hacking

DEX – Free from security risks

  • Liquidity

CEX – High

DEX – Low

  • Popularity

CEX – Highly popular

DEX – Not much popular

  • Regulation

CEX – Easy to regulate and requires license

DEX – Difficult to regulate and does not require a license

  • Fees

CEX – Charges fee

DEX – Zero or minimum fee

How DEXs Work

Decentralized Exchanges work in the following ways.

  1. On-Chain Order Books

On-chain transactions occur on the DEXs that use on-chain order books. On-chain order books are blockchain transactions. These transactions require an overall update of the blockchain networks. The time to perform transactions depends on blockchain network congestion. It takes longer if the volume of transactions is huge.

  1. Off-Chain Order Books

DEXs using off-chain order books differ from on-chain order books DEXs. Off-chain transactions happen outside the blockchain. The record is hosted in a centralized entity. These DEXs are semi-decentralized in their nature, and they use ‘relayers’ to manage off-chain order books.

  1. Automated Market Makers (AMM)

Automated market makers impart liquidity to the exchange. The AMM-based DEXs use liquidity pools instead of order books. AMMs got immense fame in 2020 and are used by popular DEX platforms.

Top 5 DeFi Exchanges

1. Uniswap

Uniswap is an automated decentralized finance protocol to create liquidity and exchange cryptocurrencies. This open-source software is licensed under GPL and is powered by a constant product formula (x*y = k). Uniswap protocol is used to trade ERC -20 tokens on the Ethereum blockchain fast and efficiently. The Uniswap protocol enables developers, liquidity providers, and traders to take part in an open and accessible financial marketplace. It was created by a former mechanical engineer at Siemens in 2018. In October 2020, Uniswap was declared the largest decentralized exchange and the fourth-largest cryptocurrency exchange by daily trading volume.

Uniswap DeFi
Uniswap

In order to use Uniswap, the users need to have an Ethereum wallet and some ETH. Then users can swap tokens or provide liquidity. Uniswap utilizes liquidity pools to create more efficient markets. Uniswap protocol adds a pair of tokens to a smart contract. Users can buy and sell this pair of tokens.

Uniswap Pool
Uniswap Pool
Uniswap Pair
Uniswap Pair
Uniswap Trades
Uniswap Trades

Accomplishments

  • All Time Volume – $234B+
  • Liquidity Provides – 72K+
  • All Time Trades – 45M+
  • DeFi Integrations – 200+
  • Token Pairs – 35652
  • 24H Volume – $1.1B
  • Total Liquidity – $8.2B

Uniswap Products

  1. App
  2. Analytics
  3. Token Lists
  4. Unisocks
  5. Sybil
  6. Unipig

Uniswap Fees

Liquidity Provider Fee

Uniswap charges a 0.3% fee for swapping tokens. The swapping fee is deposited into the liquidity reserve.

Protocol Fee

Currently, Uniswap does not charge any protocol fees but in the future, there is a likelihood of a 0.05% fee to be turned on.

Uniswap Pros and Cons

Uniswap Pros

  • Users have full custody of their coins
  • Flash swaps
  • Low fees

Uniswap Cons

  • Only supports ECR-20 tokens
  • Fake coins
  • Transaction failures due to low gas fee, maximum price, and insufficient liquidity

2. SushiSwap

SushiSwap is a decentralized community-run exchange functioning on Ethereum. SushiSwap is an advanced fork of Uniswap. It processes token swaps and yield farming through AMM smart contracts. SushiSwap was controversially launched in 2020. The founding team of SushiSwap copied the open-source code of Uniswap to create SushiSwap. Similar to Uniswap, SushiSwap uses a collection of liquidity pools. SushiSwap is a popular platform after Uniswap because it provides access to newer and less liquid cryptocurrencies which are unavailable on traditional DEXs.

Sushi protocol is governed by community vote and community vote is responsible for all the major changes in the protocol.

SushiSwap mirrors a conventional exchange where users can buy and sell distinct crypto assets. The traded tokens are maintained through smart contracts. The users lock crypto on the platform and traders can access them.

Accomplishments

  • Total Liquidity – $5.5B+
  • Total Volume – $59.7B+
  • Total Pairs – 1,063
  • Discord Members – 25k+
  • Sushi Holders – 150k+

SushiSwap Products

  1. SushiSwap AMM
  2. BentoBox Dapps
  3. Kasha Lending
  4. API

SushiSwap Fees

SushiSwap charges a trading fee of 0.3% and there is also a transaction fee while approving tokens. Each token needs approval only once.

SushiSwap Pros and Cons

SushiSwap Pros

  • Support from main DeFi names
  • 0.05% of the exchange trading fee is awarded to xSUSHI token holders
  • Fair playing field

SushiSwap Cons

  • Controversial creation
  • Only one audit report before the launch
  • Anonymous team

3. 1Inch Exchange

1inch is a distributed network to unite decentralized protocols. It is a DEX aggregator running on Ethereum and Binance Smart Chain (BSC). 1inch picks the cheapest crypto prices across DEXS and helps its users to avoid checking every exchange to find the best price for a swap. 1inch brings profitable and protected operations in decentralized finance. Launched in 2020, 1inch provides access to substantial liquidity for swaps over 77 connected sources i.e. 53 on Ethereum and 24 on BSC. This DEX aggregator focuses on security, speed, and quality output.

1inch launched an AMM exchange Mooniswap that aims at minimizing impermanent loss and brings more value to liquidity providers. 1inch established own cryptocurrency i.e. 1INCH. It is a ‘governance token’ that lets the users vote on the performance of 1inch.

Accomplishments

Liquidity Protocol

  • Total Liquidity – $310M+
  • Total Trading Volume – $6.5B+
  • Total LP earning – $28M+
  • 1INCH distributed through liquidity mining programs – 83M+

Aggregation Protocol

  • Ethereum Network Total Volume – $33.1B+
  • Ethereum Network Trades – 1.1M+
  • Monthly Active Users – 40k
  • Ethereum Network Liquidity Sources – 53
  • Binance Smart Chain Total Volume – $3.6B+
  • Binance Smart Chain Trades – 750k+
  • Monthly Active Users – 39k
  • BSC Liquidity Sources – 24

DAO

  • Governance Rewards – $9.2M+
  • 1INCH Token Staked Value – 42M
  • Voting Addresses – 9k+
  • Protocol options under control – 6

Token

  • 1INCH Token Current Price – $6.81
  • Circulation Supply – 160M
  • Total Supply – 1.5B
  • Holders – 87k

Wallet

  • Supported Networks – 2
  • Access Liquidity Sources – $19B
  • Protocols connected – 70+
  • Supported languages – 8

Contributors

  • Contributors – 50+
  • Backers – 20+
  • Partners & Supporter – 20+
  • Countries – 10+

1Inch Products

  1. Protocols
  • Liquidity Protocol
  • Aggregation Protocol
  1. Exchange
  2. Governance
  3. Farming
  4. API

1Inch Fees

1Inch Exchange is free of cost and does not charge any fees or commission for its services, deposits, and withdrawals. However, you have to pay the gas cost of your transactions.

1inch Pros and Cons

1Inch Pros

  • Intuitive interface
  • No deposit and withdrawal fees
  • No exchange services fee
  • CHI Tokens reduce transactions cost
  • High liquidity
  • AMM Mooniswap

1Inch Cons

  • No fiat options
  • Hard to use for beginners
  • The Infinity Unlock might be vulnerable

4. PancakeSwap

PancakeSwap is a DEX on Binance Smart Chain for swapping BEP-20 tokens. It was founded in 2020 and appealed to tons of new users because of its innovative breakfast-themed products, fast transactions, and lower fees. PancakeSwap uses AMM (automated market maker) model.

PancakeSwap’s governance token is called CAKE. This CAKE token is tradeable on Binance, PancakeSwap, Gate.io, KuCoin, and several other DEXs. PancakeSwap allows you to farm CAKE. On the PancakeSwap farm, you can deposit LP tokens. Some popular LP token pairs are:

  • CAKE – BNB LP
  • BUSK – BNB LP
  • BETH – ETH LP
  • USDT – BUSD LP
  • USDC – BUSD LP
  • DAI – BUSD LP
  • LINK – BUSD LP
  • TWT – BNB LP

Functions

On PancakeSwap, you can make a point of your crypto in three ways

Trade

  • Instantly swap crypto tokens without any account or registration
  • Trade directly from your wallet app with 100% ownership of your crypto

Earn

  • Earn free tokens by staking CAKE
  • Earn CAKE by staking LP tokens
  • Earn more CAKE by staking CAKE
  • Earn trading fee by staking your tokens in LPs (Liquidity Pools) even if your trading pair is not supported

Win

  • Win PancakeSwap Lottery
  • Participate in trading competitions and games and win collectible NTFs
  • Win BNB by predicting about BNB price

PancakeSwap Products

  • Exchange
  • Yield Farming
  • Syrup Pools
  • Lottery
  • Prediction

PancakeSwap Fees

  • 0.2% fee on all token swaps

PancakeSwap Pros and Cons

PancakeSwap Pros

  • Fast transactions
  • Intuitive interface
  • High rewards
  • Code audit

PancakeSwap Cons

  • Conversion of ERC-20 tokens to BEP-20 is costly
  • Providing liquidity to pools can lead to impermanent loss

5. Bancor

Bancor is an on-chain liquidity protocol that can be applied on any smart contract-enabled blockchain. The Bancor Protocol is an open-source standard and permissionless ecosystem to create Smart Tokens. Smart Tokens, also called automated liquidity pools, decentralized liquidity pools, or bonding curves is the world’s first blockchain-based automated liquidity pool (AMM) that can be exchanged through blockchain-based smart contracts. It is an open marketplace with no barriers where traders, liquidity providers, and developers can participate freely. Founded in 2016, Bancor does not require a match between two parties and makes use of a reserve method to automate price discovery and continuous liquidity for tokens.

Functions

With Bancor, you can:

  • Trade tokens on blockchains e.g. Ethereum
  • Provide liquidity
  • Borrow against a liquidity position
  • Use a liquidity pool
  • Offer a liquidity pool for whitelisting
  • Integrate Bancor liquidity and trading

Accomplishments

  • Total Liquidity – $2.285B+
  • 24h Volume – $107.313M+
  • BNT Price – $7.66
  • Total BNT Staked – 76.83%

Bancor Products

  1. Bancor Trading
  2. Bancor Pools
  3. Bancor Data
  4. Governance

Bancor Fees

Bancor does not charge any deposit fee. However, Bancor trading and withdrawal fees vary from exchange to exchange.

Bancor Exchange Fees (by exchange site)

Bancor Pros and Cons

Bancor Pros

  • Easy to use
  • No deposit fee
  • Liquidity protection
  • Research material

Bancor Cons

  • Requires technical knowledge
  • Confusing for beginners
  • No fiat support

Conclusion

Though Decentralized Exchanges (DEXs) have their own issues and limitations, yet they have earned a good name in cryptocurrency trading where the community enjoys all the rights and ownership. The idea working behind DEXs is to maximize trading outcomes by maintaining security, privacy, and convenience. While DeFi is continuously evolving we can hope that the best from DEXs will appear favorably over time.

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