Decentralized finance, or DeFi, means financial systems which are built and developed on blockchain. These systems operate independently from traditional centralized financial institutions, such as banks.
The financial sector was severely disrupted by blockchain technology. Numerous innovations were made, DeFi being one of them. Top DeFi protocols quickly gained popularity. According to DefiLlama, the total value locked (TVL) in DeFi protocols today is about $47.9b.
In this article we will briefly overview the most well-known and widely used DeFi protocols. To get a basic understanding about DeFi, read this Bitlocus blog post.
- Uniswap: A decentralized exchange protocol that allows users to trade tokens on the Ethereum blockchain.
- MakerDAO: A decentralized lending platform that uses collateralized debt positions (CDPs) to issue stablecoins.
- Compound: A decentralized lending and borrowing platform that allows users to earn interest on their assets.
- Aave: A decentralized lending platform that allows users to earn interest on their assets and also borrow against them.
- Kyber Network: A decentralized exchange protocol that allows for the instant conversion of tokens.
- Chainlink: A decentralized oracle service that allows smart contracts to access off-chain data.
- yearn.finance: A decentralized finance (DeFi) platform that uses a combination of lending, borrowing, and yield farming to maximize returns on users' assets.
- Synthetix: A decentralized synthetic asset platform that allows users to trade synthetic versions of traditional assets.
- dYdX: A decentralized trading platform for derivatives and margin trading.
- Balancer: A decentralized exchange protocol for trading ERC-20 tokens on the Ethereum blockchain.
How to choose a reliable DeFi protocol?
As DeFi is a relatively new and evolving field, the reliability of separate protocols or projects varies. It is wise to check if the DeFi protocol or project has been audited, and with a proven track record of safety, security and reliability. A core component of the DeFi protocol, the smart contract, could have bugs or other shortcomings, so it is important to do a thorough research and make an informative decision before investing.