Technological advancements have resulted in major transitions in the world of decentralized finance. Being a fast-growing space, monitoring the activities inside the platform is essential, thus Defi protocols are introduced.
What are Defi protocols?
Defi protocols automate financial services like lending, borrowing, and trading without the need for an intermediary, i.e., with the help of smart contracts. For every member of the Defi ecosystem, this set of guidelines and standards guarantees a uniform experience.
Top 11 defi protocols
- Lido
- UniSwap
- AAVE
- MakerDao
- Summer.fi
- Pancake Swap
- Balancer
- Compound Finance
- Curve Finance
- dYdX
- De.Fi
1. Lido
Lido is one of the most popular defi platforms with a TVL (Total Value Locked) of more than $27.31 billion. The easy-to-use and highly accessible interface allows users from every niche to join the platform without fearing the stake amount and functionalities. Though it started with Ethereum, Lido broadened its staking capabilities to provide services in MATIC, SOL, and some other cryptocurrencies as well. Lido allows traders to stake their assets and receive a stETH token as a reward, which can be utilized in different defi platforms. Its governance token, LDO enables stakeholders to cast their vote against or in favour of a decision, representing them in the decision-making process of the platform.
| Advantages | Limitations |
| User-friendly interface | Fees for staking rewards |
| Liquidity | Semi custodial service |
| Flexibility | Semi-custodial service |
2. Uniswap
Built on the Ethereum blockchain, Uniswap allows permissionless trading options. This means transactions can be directly done through the wallet, eliminating the need for an intermediary. Utilizing smart contracts automates transactions, contributing to market liquidity. Transactions are done directly on the blockchain to ensure privacy and security. Its native token UNI, owns a total supply of 1 billion tokens. The user-friendly platform offers beginner-level features as well as advanced options for experienced traders. It facilitates low-cost transactions by supporting networks that are compatible with Ethereum. The $1 trillion in trading volume has enabled Uniswap to enhance its offerings.
| Advantages | Limitations |
| User-friendly interface | High fees for purchasing third-party crypto services |
| Low-cost transactions | No Android or iOS apps |
| Supports multiple blockchain networks |
3. Aave
Aave is one of the simplest yet pioneering entities of the Defi platform. It allows lending, borrowing, and trading of cryptocurrencies without any involvement of third parties. AAVE offers a flash loan feature to its users, paying the loan back in a single transaction. It has a TVL value of more than $1 billion. Its latest version Aave V3 expands its network to 10 different blockchains, allowing users access to multiple ecosystems.
| Advantages | Limitations |
| Wider availability of tokens | Not user-friendly for beginners |
| High TVL | Liquidity risks |
| Multi-platform compatibility | High gas fees on the Ethereum blockchain |
| Flash loan availability |
4. MakerDao
MakerDao is one of the revolutionary defi platforms that allows users to act as buyers and sellers at the same time. Its stablecoin DAI, maintains stability by implying Maker protocol. The over-collateralization feature ensures loan security. Users can select between variable and stable interest rates using the dual rate approach.
| Advantages | Limitations |
| Decentralized | Not user friendly |
| DAI token stability | Liquidity risks |
| Multi collateral support | High gas fees on different blockchain |
| Variable interest rates |
5. Summer.fi
Summer.fi is one of the highly trusted platforms for defi capital deployment. Being a stand-alone platform, Summer.fi provides users with advanced automation features like stop loss, auto buy, and auto sell. This automotive feature allows users to earn better rewards from their investments. It also provides users an option to access assets from different blockchain networks, with its cross-blockchain function.
| Advantages | Limitations |
| Advanced automation features | Limited to ERC 20 tokens |
| Easy to use | |
| Multiple protocol integration | |
| Low transaction fees |
6. PancakeSwap
PancakeSwap is a DEX protocol built on the Binance Smart chain but now supports eight blockchain networks including Ethereum. Its native crypto token CAKE has a total supply of 450 million tokens. The Automated Market Maker model allows wallet-to-wallet trades, eliminating third-party involvement. It also supports services like yield farming and staking with the capability of return rewards.
| Advantages | Limitations |
| User-friendly interface | No native crypto wallet |
| Automated Market Maker model | No mobile apps |
| Large token availability |
7. Balancer
Balncer is a unique and innovative decentralized exchange platform. It combines features of AAM and index funds to enable automatic transactions. Users are able to create liquidity pools with their own token distributions, up to eight different tokens. It provides liquidity owners the advantage of earning trading fees.
| Advantages | Limitations |
| Smart rebalancing | Not user-friendly for beginners |
| Customizable pools | Limited blockchain network |
| Multiple tokens |
8. Compound Finance
Operating on the Ethereum blockchain, Compound Finance allows users to borrow and fund crypto coins. Smart contract-assisted transactions enhance security and speed up the process. Its native token, COMP allows governance and yield farming. The inclusive financial system eliminates the hurdles of credit checks and transaction minimums. The liquidity pools offer direct trading opportunities without employing traditional exchanges.
| Advantages | Limitations |
| No minimum transaction limit | Market volatility threats |
| User friendly | Over collateralization |
| Support ER 20 assets | Complex for beginners |
| Yield farming and governance | High gas fees on Etherium |
9. Curve Finance
Curve Finance is one of the popular decentralized exchange platforms built on the Ethereum network. Supported by liquidity pools and the Automated Market Model, Curve Finance trades stable coins and wrapped tokens including sBTC and renBTC. With an annual interest rate of more than 300% in some pools, Curve offers enhanced privacy and community-driven development.
| Advantages | Limitations |
| Focus on stablecoins and wrapped tokens | Not user-friendly for beginners |
| Frequent security audits | High gas fees |
| Reduced slippage |
10. dYdX
dYdX is one of the leading decentralized exchanges that provides advanced financial tools to provide a competitive fee structure and gas-free trading experience. With a lower level of collateralization, dYdX increases accessibility. Low translation fees and improved performance contribute to community engagement and governance.
| Advantages | Limitations |
| Advanced financial instruments | Limited spot trading |
| No KYC requirement | Limited blockchain |
| Interoperability with Cosmos | Complex for beginners |
| Varying interest rates |
11. De.Fi
De.Fi provides smart contract analysis to detect vulnerabilities and gives security scores to the platform. It monitors wallet transactions and balances. Exclusive security features like De. Fi shield and scanner examine the functionings thoroughly. The user-friendly transaction tools allow easy crypto exchanges across different blockchain platforms.
| Advantages | Limitations |
| Advanced security features | Complex |
| Multiple blockchain support | Technical knowledge required |
| Extensive dashboard | Requires regular updates |
| Real-time analytics |
Final Thoughts
Defi platform provides a new system for borrowing, lending, and trading in which wallet-to-wallet transactions are made possible without the need for intermediaries. It has completely changed how people perceive financial systems. In the coming years, the Defi platform will undergo huge advancements leading to a new global finance system.