DeFi or the Decentralised Finance industry witnessed massive progress in the year 2020. This implanted the faith in the investors about DeFi tokens. With many DeFi assets coming to the arena and some of them providing great returns, it is time for us to evaluate the top DeFi tokens in a bit of detail and analyze which of them can prove to be beneficial in the current year 2021.
Here in this article, we have shortlisted the top 10 DeFi tokens and we will discuss each of them. However, before digging into that, let us see what is a DeFi token?
So, DeFi tokens can be defined as financial applications that run on Blockchain technology and are decentralized. These tokens use the concepts of the traditional banking system and thus they are highly liquid as well. The hype around DeFi tokens and the DeFi industry is because of its power to remove the third party or the middlemen in the financial industry. Most of the DeFi tokens are built on Ethereum Blockchain.
Top 10 Defi Tokens With Massive Potential
1inch : 1INCH
This is a token introduced by the 1inch cryptocurrency exchange in association with the Mooniswap exchange. It is a utility token as well as a governance token. It has been developed for the 1inch AMM and also for Decentralized Exchange Aggregator.
Total 90 million 1inch tokens were offered by the exchange to all who used the exchange at least once in their lifetime or traded at least an asset worth $20 in a maximum of four transactions. It is an Ethereum based token that provides rewards to the liquidity providers.
Uniswap Token : UNI
It is one of the most popular DeFi tokens in the space. It provides around 7% return annually on the deposits you keep. There are no fees for withdrawing or depositing UNI. This token has one of the best security in the market and also the funds are not kept in the hot wallets completely. This adds to the level of security and boosts it up. Anyone having Ethereum can trade UNI and that is the best part about UNI tokens.
Chainlink : LINK
If you go by Market capitalization, then the LINK token is having the highest market cap. The token is an oracle service on the decentralized platform that enables the users to access the data, payments, and other events without compromising on security.
It is a different one from the rest as it involves an oracle that provides the data from outside to trigger the execution of the smart contracts. It is one of the most promising DeFi projects in the current times having huge potential. At present, the rate of interest it provides to the investors is around 4.35%.
Compound : COMP
With COMP token you can deposit and earn interest on the same as well as borrow against the same. You can provide liquidity to the pool of Compound tokens and earn interest – an interest that is compounding continuously.
This is one of the most important reasons for its popularity. Though the rate of interest is calculated as per the demand and supply of the tokens. The YTD is around 5% of the Compound token. The COMP token holders have the right to vote. They can vote for or against the COMP protocol.
Aave : AAVE
Similar to the previous token, AAVE is also a non-custodial and an open-source liquidity protocol. This is used for earning interest on the liquidity the user provides (deposit) and also for borrowing against the deposits (as collateral). The AAVE tokens are having a safety module for the AAVE tokens which are staked.
This acts as the collateral. For rewarding the growth of the protocol, there are incentives for safety. The AAVE token holders have the decision making power regarding the AAVE token and its governance framework. There are 16 million AAVE tokens in total out of which 3 million are reserved and the remaining are in the open space for trading and lending.
Synthetix : SNX
This stands for the tokens issued by Synthetix, a DeFi exchange providing staking facilities to the users. The SNX tokens, when staked by their holders get minted into the Synths (synthetic assets). This is done by using the platform called MIntr. This platform also allows you to stake against Ether. Here the people staking their SNX for minting the Synths gets 0.30% of the value of the trade.
This is the incentive they get for staking their SNX tokens. The popularity of the SNX token surged suddenly after they implemented the inflationary policy. The SNX supply skyrocketed from 100000000 tokens (in March 219) and their estimate is to reach 260263816 tokens by August 2023.
Maker DAO : MKR
MKR is the token of Maker DAO, a decentralized organization working autonomously on the Ethereum Platform. Its main motto is to reduce the price volatility of the DAI, its stable coin against the SDR – IMF’s currency basket. MKR owners earn from the Buy-Back Program.
The platform earns from providing governance to the system of DAI and also for taking the risk of bailouts. This earning is channeled to the MKR holders. The YTD of the MKR was 208% in 2020.
Universal Market Access : UMA
It is used for creating synthetic assets. This platform allows the users to create smart-contracts that are self-enforcing and comes with economic guarantees. The idea behind this is to power the innovations taking place in the finance world which is created by Blockchain.
It is similar to the contracts made in the money market where two parties make a contract using derivatives as the underlying. However, these are accessible universally unlike the Fait contracts and are backed by economic incentives only.
Yearn. finance : YFI
yearn. finance (YFI) is truly a governance token whose motto is to provide a gateway to the complete decentralized finance ecosystem. It is adding new services to simplify the process. The YFI token holders are allowed to vote to take any decision regarding the Yearn.
YFI holder’s deposit is directly invested in the highest-yielding assets via yearning Vaults in the DeFi ecosystem. You can also earn stable coins on this platform. The interest rate changes between the protocols and thus there is no fixed interest rate on YFI tokens.
Sushiswap : SUSHI
SUSHI is the token offered by the decentralized platform Sushiswap. It is a token that can trade freely and it is available on all the major exchanges like Binance, OKEx, DigiFinex, and others.
It can be traded using other stablecoins and other crypto assets. The token can be used for providing liquidity as well. It is also based on the Ethereum platform. The incentive for the liquidity provider of SUSHI is 0.25% of the trading amount.
To summarise it all, we can say, the DeFi tokens are the future of investment as it seems from the huge surge in their value in recent times. However, making a wise decision for investing in DeFi tokens is necessary.
Every DeFi tokens are not the same and thus you need to be aware of its tokenomics before investing in it. Make sure you know about its fees, hidden charges, price/ market capitalization, and underlying asset to make an informed decision.