Here at Token Metrics, we understand that our most valuable asset is you, our audience.
With your help, we have put together a guide to the Top 3 DeFi Projects of 2021, as voted upon by you.
So sit back, relax, and enjoy the Moon Awards.
What is a DeFi Project?
DeFi projects have been at the heart of the crypto bull run in the cryptocurrency space due to their parabolic increase in popularity and use cases. As a result, it is essential to understand what DeFi projects are and their place in the crypto ecosystem.
DeFi stands for decentralized finance, and DeFi projects focus on bringing non-custodial financial services to the mass market. In short, the DeFi movement aims to create an economic system that is open to everyone and minimizes the need to trust central authorities.
DeFi projects achieve this goal by leveraging Ethereum’s interoperability and smart contract capabilities. The DeFi movement’s reliance on Ethereum is the driving force behind the Ethereum network’s skyrocketing fees as many DeFi projects interact with Ethereum’s smart contracts.
In the crypto space, DeFi projects currently account for over $6 billion in assets, and the number continues to grow each week substantially. With over 100 projects providing various DeFi solutions, it is no surprise that the DeFi movement has taken the crypto market by storm.
Top 3 DeFi Projects of 2021
1) 1inch Network (1INCH)
“The initial protocol of the 1inch Network is a DEX aggregator solution that gives provides real value to users by automatically routing trades through multiple DEXes (Uniswap, Sushiswap, Balancer, etc.) while providing the best swap rate and the lowest gas fees. By using 1Inch, users can easily find the best price for every decentralized trade they execute.” – Forrest Przbysz, Head of Research, Token Metrics
In what has been our closest Top 3 vote in Moon Awards categories to date, the 1inch Network arrives in 1st place with a little over 25% of the total vote as the best DeFi project. With the rise of DeFi and decentralized exchanges, 1inch has quickly risen to the top as the premier DEX aggregator in the space.
What is a DEX aggregator? Well, think of it this way. In DeFi, anyone can trade on a decentralized exchange as traders only need to connect their wallets and therefore never give up access to their funds or information.
There are multiple decentralized exchanges, though, and they are all structured in slightly different ways and sell cryptocurrencies for slightly different prices. Now with slightly different prices, how do investors get the best price available?
This problem is where 1inch comes in as a DEX aggregator. 1inch scrapes the biggest decentralized exchanges for the lowest prices and reroutes its customers’ trades to ensure the best prices.
Sergej Kunz and Anton Bukov founded the 1inch Network in 2019 during ETHNewYork’s Hackathon. Since then, the project has raised roughly $15 million in funding from companies such as Binance Labs, Galaxy Digital, and Pantera Capital. You can watch our interview with the 1inch Network co-founder Anton Bukov here!
The 1INCH token was not available initially, though, as the token launched on Christmas day of 2020. The token functions as a governance token that holders use to vote on how the platform runs. The primary way to earn 1INCH tokens is through providing liquidity to the 1inch Liquidity Protocol.
Token Metrics’ Analysis of the 1inch Network
2) Synthetix Network (SNX)
“The day people realize how big the derivatives markets are in legacy and how small the derivatives world is in the crypto world, coins like SNX could take off. The entire “future of Wall Street trade” is not on people’s radar after the big BTC drop. That’s a mistake. SNX could be as big as the CME or CBOT one day.” – William Noble, Chief Technical Analyst, Token Metrics
Arriving in 2nd place after being barely edged out by 1inch Network in one of the closest votes in Moon Awards history is DeFi project Synthetix Network. Starting initially as Havven, the project rebranded to Synthetix Network in 2018. With the rebranding, the project launched with a whole slate of new features.
Synthetix Network operates as a decentralized synthetic asset issuance protocol on top of Ethereum. Essentially, the Synthetix platform allows the creation of on-chain synthetic assets that track the value of assets in the real world.
Some of the assets supported by the platform include things such as synthetic fiat currencies, synthetic commodities like gold, and even complex assets like equity indices.
This DeFi project aims to solve liquidity and slippage issues common for tokens trading on DEXes. Holders of SNX token stake the coin to get paid a portion of the fees generated from the exchange activity.
Synthetix has ballooned in popularity over the past year, and as of June 2021, SNX has a market cap right around $1 billion and a total 24-hour trading volume of just under $100 million.
Token Metrics’ Analysis of Synthetix Network
3) Uniswap (UNI)
“Uniswap is the market leader for decentralized exchanges. After its launch in 2018, Uniswap has helped greatly with the emergence of Defi and its applications to the point that there’s more demand than it can handle at times. With the emergence of scaling solutions, I expect Uniswap to evolve and to stay positioned as a market leader for Defi applications” – Ugo Nduaguba, Partner, Token Metrics Ventures
Coming in a very close 3rd place is the DeFi project Uniswap. Interestingly enough, Uniswap ties closelyto our 1st place DeFi project, 1inch Exchange, as it is a decentralized exchange (DEX).
Uniswap launched in November of 2018 and was recently replaced by Uniswap Version 3 in May of this year. Uniswap Version 3 is a major upgrade over Version 2 as it added many new features, including concentrated liquidity and multiple fee tiers.
The Uniswap DeFi project is a protocol built on the Ethereum network for swapping ERC-20 tokens. Unlike centralized exchanges, Uniswap is designed to function as a public good, meaning that it is a platform for the community to trade tokens without fees or intermediaries.
Uniswap’s primary distinction from other DEXes is a pricing mechanism called the “Constant Product Market Maker Model.” This model means that any token can be added to Uniswap by funding it with an equivalent value of ETH and the ERC-20 token traded.
Absolutely any ERC-20 token can be listed on Uniswap with no permission required.
In September of 2020, Uniswap launched the UNI token by airdropping 400 UNI tokens to every wallet address that had interacted with the Uniswap protocol before September 1. As a governance token, UNI entitles holders to a vote in how the protocol runs.
It is important to note that Uniswap plans to distribute a capped total of 1 billion UNI over four years, with 60% reserved for community distribution, 21.5 % earmarked for Uniswap employees, and the remaining 18.5% allocated to investors and advisors.
Uniswap is a genuinely unique DEX, and with the recent release of Uniswap Version 3, the project will continue its reign as one of the best DEXes in the crypto space.
Token Metrics’ Analysis of Uniswap
Honorable Mention: Aave (AAVE)
“Aave is an open-source non-custodial protocol on Ethereum for decentralized lending and borrowing; many experts consider Aave responsible for kickstarting the Defi craze back in 2020. In May 2021, Aave achieved $14.4 Billion in TVL and continues to be the industry leader in DeFi.” – Diego Lara, Partner, Token Metrics Ventures
After being narrowly edged out by Uniswap, Aave has more than earned its spot as an honorable mention on this list. Aave was created in 2017 by developer Stani Kulechov and initially launched as ETHLend.
Kulechov’s original vision was to create a platform that would connect cryptocurrency lenders and borrowers by matching loan requests with specific offers. However, the adverse crypto market in 2018 prompted a readjustment of ETHLend and encouraged the rebrand to Aave.
The project then relaunched in 2020 as Aave. The key featured introduce with the relaunch was Aave’s algorithmic money market function. Where ETHLend would individually matcher borrowers with suitable lenders, Aave implemented a liquidity pool system where crypto loan assets are pooled together and interest rates determined algorithmically depending on the asset borrowed.
With the new system, if an asset is in short supply, interest rates are set higher to encourage lenders to contribute more. The opposite is true, as well as when there is a significant supply, interest rates are set lower to encourage borrowers to take out a loan.
At its core, Aave is a decentralized money market running on Ethereum that enables users to lend and borrow a range of cryptocurrencies.
What distinguishes Aave from the rest of the market is the diverse range of cryptocurrencies in which users can take out loans and the way the platform allows lenders to earn passive income on the funds they make available to borrowers.
Token Metrics’ Analysis of Aave
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