Last updated on February 7th, 2023 at 03:14 pm
Top DeFi Dapps:
A lot has changed since the inception of decentralized finance (DeFi) in the crypto-verse. 2020 was the year when the concept and application of decentralized finance (DeFi) rocketed, with Defi tokens such as Uniswap causing massive gains in the markets, reaching all-time highs. Most Defi projects are hosted on the Ethereum blockchain. These projects are run through Decentralized applications (DApps). In this article, 36crypto looks at the top 5 DeFi DApps out there as we head into 2022.
Top DeFi Dapps In 2022
Before we dive into the best DeFi Dapps that one can use in cryptocurrency to conduct financial business in a completely decentralized manner and without an intermediary, there is a need to define what Dapps are.
What Is a DApp?
A decentralized application (DApp) is a software application running on a blockchain. Unlike internet-based applications, they don’t need a centralized database to function. They run on Ethereum, but they also run on other blockchains that run smart contracts, such as EOS and TRON, POLYGON, WAX, etc.
The financial industry is optimistic that these top DeFi dApps will usher in a revolution by enabling people to conduct financial business in a completely decentralized manner and without an intermediary. So what are the top DeFi DApps out there? Below are the highlights of the five best DApps.
Uniswap
Uniswap is a decentralized exchange (DEX) that allows one to participate in the transactions of ERC-20 tokens without the governance of a centralized body or intermediary. It gives permissionless access to financial services, meaning that any individual can create any ERC market so long as they have an equal amount of ETH to back it. That allows new projects to create a base price for their token.
Advantages
- Uniswap can be used to liquidity mine for specific projects.
- No listing fees
- Requires no native tokens
- Cheapest gas costs of any DEX
Disadvantages
- Its decentralized nature means there is no review process
- It is easy for scammers to create a token with a name similar to a popular DeFi platform, tricking users into buying useless tokens.
MakerDAO
MakerDAO the first decentralized stable coin built on the Ethereum ecosystem is a lending platform where users can borrow the stablecoin DAI, which is pegged to the US dollar. All lending actions are carried out by smart contracts, meaning that no human is involved in the processing and facilitating of any specific loan. The key to MakerDAO’s success as a lending platform has been its decentralization.
MakerDAO has no limit just like other Dapps. Anybody anywhere in the world can have access to it. There is no requirement for KYC (Know Your Customer), as they would be if they used a lending service through a bank. The DAI uses cryptocurrencies as collateral, namely ETH, or some Ethereum-based (ERC-20) tokens, including BAT.
This cryptocurrency becomes locked up until the user is ready to repay the loan and any incurred fees. Once they do so, the ETH will be released. However, if the ETH price drops below a certain point, it will be sold off to pay the DAI that has been borrowed, plus any penalties. These liquidations, or the threat of them, help to stabilize the governance of the MakerDAO system.
Aave
Aave another borrowing and lending DApp built on the Ethereum blockchain is an open-source and non-custodial liquidity protocol where users can lend their assets and earn interest in the process.
Aave protocol is unique in that it tokenizes deposits as aTokens a governance token, which accrues interest in real-time. It also features access to highly innovative flash loans, allowing developers to borrow instantly and easily; no collateral is needed.
Flash loans are loans that are valid just for one blockchain transaction. It allows for uncollateralized debt.
Compound
Compound is another borrowing and lending DApp, built on the Ethereum blockchain. The underlying idea of Compound is to put crypto-assets to use by letting users lend and borrow Ethereum-based assets. All are conducted through the smart contract protocol. On the other hand, lenders can earn interest from cryptocurrencies by adding to the liquidity pool.
The protocol was centralized at launch; however, the recent release of its governance asset COMP ushered in a community-driven decentralized autonomous organization (DAO).
The tokens used on Compound are called cTokens. These tokens allow users to track the value of the assets they lent and the interest accrued.
The interest of every token will fluctuate depending on the supply and demand of their native cryptocurrencies. However, typically, it will still probably be more than the interest offered by a savings account. Like other DApps, Compound has the advantage of not requiring identity checks and lower transaction fees. Also, the risk of borrowing is minimal, as assets are overcollateralized (a security measure that involves putting forward more of the asset than is needed as collateral.)
Curve
Curve is a DEX that uses automated liquidity pools. It is specifically designed to exchange stablecoins and Bitcoin-backed ERC20 tokens such as Wrapped Bitcoin (WBTC). Therefore, as maintenance costs are lower, so are fees.
Users can earn rewards for adding liquidity to the liquidity pool on the curve platform. Curve is also popular as it employs the high use of stable stablecoins in yield farming making it easier for yield farmers to navigate the platform without any hassle.
Although the lack of assets that can be exchanged on this platform (according to claims by Curve’s creator) increases its operating efficiency, the fact that you can only exchange very few coins, in particular, stable coins (and Bitcoin-backed ERC-20 tokens) could also be a disadvantage from a user’s point of view.
Conclusion
The positive increase in the utilization of DeFi continues to make DApps inevitable and more prevalent. They have distinct advantages over conventional applications, such as users having complete control over their funds, and ultra-low transaction fees.
In addition, as crypto becomes more widely used, people will no doubt be attracted to how they accept cryptocurrency as payment. With DApps they can be used for earning passive income even offering lending and borrowing services at lucrative interest rates.
Cryptocurrency Risk Disclaimer
The views, thoughts, and opinions expressed in this article are not investment advice. Please do your research and consult with an investment professional before making investment decisions.
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