Decentralized finance (DeFi) has been one of the main driving forces of the current cryptocurrency bull run. While beginners want to buy bitcoin with credit card, more tech-savvy investors have turned to DeFi for some incredible returns.
With that said, it’s not an easy ecosystem to navigate. For this reason, we made this shortlist of DeFi tokens. This article will list some of the most promising platforms in decentralized finance and delve into their projects’ details.
DeFi Tokens to Keep an Eye On
New tokens are released each day, and some bring their fair share of innovations to the sphere. However, the projects on our list have a few advantages over new, low-cap tokens:
- Proven concept – the projects on this list have to work, real-life applications.
- Secure and audited smart contracts – their smart contracts present no security failure points or backdoors.
- Fully decentralized – the native tokens of the community are reasonably distributed within the wallet holders.
So, without further ado, let’s get into the gist of our list.
While it cannot be considered as a purely DeFi token, Ethereum is a major player in the ecosystem. It remains, hands down, the most used blockchain for dApp development. More than 90% of all DeFi projects run on the Ethereum network.
Ethereum is the first smart contract blockchain, and its token native ETH is used to pay transactions on the network. This means that everyone using decentralized finance applications must pay a “gas fee” with ETH. So, as the DeFi industry grows, we can expect the ETH price to increase as well.
Moreover, since such a large part of the sector relies on Ethereum, the upcoming updates to the network are crucial. Recently, the developer community added the Berlin upgrade, a minor fix to Ethereum’s rising gas fees. The update was quickly followed by a new all-time high for Ethereum on the markets, with the rest of the DeFi trailing right behind.
The effect of the upcoming ETH 2.0 upgrade on the market will be much more considerable. By providing faster, cheaper, and more eco-friendly transactions, many of the current shortcomings of DeFi will cease to exist, turning Ethereum into a powerhouse in the industry.
Binance Coin (BNB)
Similar to Ethereum, BNB is also used to pay for gas fees on the Binance Smart Chain (BSC). BSC is a fairly recent smart contract blockchain that is already seeing some incredible growth thanks to its fast transactions and negligible transaction fees.
Furthermore, it allows for BNB tokens to stake their coins and receive passive income rewards for their efforts.
The rising popularity of the BSC resulted in BNB’s price skyrocketing in 2021, registering 10x gains, and entering the top 3 by market cap. With more developers releasing projects on the Binance blockchain, we are bound to see this token’s value grow even further.
Uniswap is the largest and most popular decentralized crypto exchange on the market, which runs on Ethereum. Its native token UNI is a governance token that gives users on the network to participate in network upgrades and changes.
Like BNB, Uniswap allows users to earn passive income by staking their tokens in a liquidity pool. Thanks to this feature, Uniswap managed to solve the liquidity issues many decentralized exchanges encounter.
A copycat of Uniswap, PancakeSwap is an AAM, (or DeFi exchange) that runs on the Binance Smart Chain. Its popularity skyrocketed after the Ethereum-based decentralized exchanges started to experience prohibitive gas fees due to blockchain saturation.
CAKE has become the second-most popular DEX on the market, even surpassing Uniswap at one point.
Aave is a popular decentralized lending and borrowing platform based on the Ethereum blockchain.
Lenders can earn interest on their crypto holdings by locking them in the smart contract protocol. On the other hand, Borrowers can put up their crypto as collateral and get access to a line of credit in the cryptocurrency of their choice. You can learn more about the Aave loans platform, for more information and details.
The Aave token can be used for transaction discounts on the platform but can also be used as a governance token.
Chainlink is a decentralized oracle network that connects blockchains and allows them to communicate with each other. LINK isn’t a DeFi token by itself. Instead, it has to be used to pay the oracle fees that act as a translator, allowing blockchains to interoperate.
It’s one of the essential pieces of the DeFi puzzle, as oracles are needed to determine real-time prices for cryptocurrencies.
With the growth of the DeFi ecosystem, the need for LINK tokens is expected to increase exponentially. As such, many investors see Chainlink as a sound investment for the mid-to-long term.
In this article, we went over some of the most important tokens of the DeFi ecosystem, their uses, and their potential. These high-performance blockchains are already revolutionizing finances, and will most likely be major contributors to the upcoming DeFi growth.