I think defi may be one of the first areas in crypto to gain significant user adoption. Below are 9 projects which i feel could be important to the defi eco-system.
*Note – this is just my personal opinion. I’m not a financial advisor. This is just a starting point for you to work from. Follow me —> @defipicks
(*Below are my April 2020 Picks –> Go here for my updated list. Many of the projects have already taken off, so sign up to my email list on the right side bar, i will send you an email with my new defi picks soon.)
3 Emerging Defi Sectors: Oracles, Lending Protocols, Exchanges
Oracles
Oracles act as a bridge between blockchains and external data-inputs used to trigger smart contracts. They ensure that data feeds are accurate and safe from manipulation. Oracles are essential to the blockchain economy. Chainlink is by far the market leader. It has implications that affect the finance, insurance, and shipping industries. The oracle niche could grow to be enormous, even extending to projects outside the blockchain space.
Here are 3 links explaining what decentralized oracles are and why they are important. 1, 2, 3. Here is Vitalik talking about how we need multiple types of oracles and oracle designs.
I’m going to discuss 3 oracle projects below: Chainlink, Tellor, and Band Protocol.
ChainLink (LINK)
Chainlink is the market leader in the oracle space, with a first movers advantage. Link already has a significantly high market-cap, but is first in a potentially enormous niche. It is also blockchain agnostic. It can potentially be the oracle solution for projects on ANY blockchain, as well as non-crypto projects. It has over 100 partnerships.
LINKs partnerships are major, vast, and include: Microsoft, Google, and Intel.
Video here explains what Chainlink does.
Token Economics of Chainlink: LINK already has a significantly high marketcap of over 1 billion, but oracles are needed by almost all projects, For this reason, i think its marketcap could continue to grow. Its price consistently rises, even as the market dumps. This token has great utility, because large amounts of link tokens need to be staked to secure large contracts. This creates demand for the token, and will likely cause its price to continue to rise.
Tellor (TRB)
This project is a decentralized Proof-of-work oracle incubated by BinanceLabs. It is a new project, which is the oracle solution for a stablecoin on Binancechain called Bidao. It is only available for purchase on a few small exchanges and Uniswap by entering the contract address. Once TRB hits larger exchanges, its price could rise dramatically.
Token Economics: The aspect that got me interested in the project is the extremely low marketcap and low-supply. It only has a 1.04 million supply, but it does have an inflation rate built-in. Read about the inflation rate here. Its inflation was recently reduced to 17%.
Here is a great article discussing Tellor Token Economics and staking.
Band Protocol – BAND is a small marketcap decentralized oracle at just 7.6 million. Here is a link to its whitepaper, and website. It incentivizes token holders to curate high quality, accurate data. BzX has considered integrating multiple oracles, including BAND, after its recent flash loan attack.
Token Economics: BAND has a low market-cap, with a fairly low supply of 100 million. BAND Tokens are required to mint any dataset token, create in demand in the marketplace. As the demand of dataset tokens increase, BAND’s demand will increase as well.
Lending Protocols
Aave (LEND) – Aave is a decentralized pool-based lender. Users can contribute funds to their reserve pool in order to receive interest bearing tokens called A-tokens. It is also an innovator in “flash loans”. Aave has quickly grown to #6 in assets locked on defipulse.
Token Economics: The LEND token has a circulating supply of 1.3 billion tokens. The token is used to reduce borrow rates, and provides a 50% fee reduction if LEND is the collateral. It is also used for governance. I have some concerns that the token itself doesn’t have good utility, but developers are working to improve the use case for this token.
Kava (KAVA) – this is a cross chain CDP platform, offering similar features to Maker. Kava will allow users to access the equity within their BTC, BNB, LINK, ATOM, and XRP tokens, letting users gain long exposure to an assets price.The project is built on Cosmos and powered by Tendermint. It is partnered with Binance, Ripple, and Arrington Captial.
Here is a link to its Whitepaper, and website.
Token Economics: Kava has 13 million supply, with inflation going to stakers. The total supply will be 100 million. So, as long as you are staking, you have no inflation. The fees on loans are paid in KAVA, and fees are burned. The KAVA token also entitles holders to governance.
Exchanges
Loopring (LRC) – This is an audited decentralized exchange protocol which uses the zkRollup and is designed for high throughput, allowing over 2k transactions per second.
Here is Vitalik’s talk on zkRollup Tech.
The protocol handles order matching and trade settlement off-chain, to reduce gas consumption. Allows for the easy launch of a DEX.
Token Economics: I like the economics of this token, it can be staked in order to earn 70% of the exchange fees which are built using the looping tech. The remaining 20% will sent to the dao and 10% will be burned. Also exchange owners need to stake LRC for security and reputation, creating demand for the token. Staking can also lower protocol fees when it is staked by the owner or market makers.
LRC has a 1.3 billion total supply, with a marketcap of 48 million.
KyberNetwork (KNC) – Kyber is a liquidity protocol that aggregates from a wide range of reserves.
Token Economics: KNC token is required to purchase and sell liquidity. Providers earn a spread on every transaction that occurs with their liquidity pool. Kyber charges a transaction fee in KNC. A portion of all the transaction fees are burned.
Synthetix Network (SNX) – this is a protocol and exchange for the trading of synthetic assets. Tokens which represent any asset can be minted. Mintable assets can include: commodities, currencies, indicies, and cryptos. Synthetix will also soon allow for leveraged trading of these assets.
Token Economics: SNX tokens can be staked in order to earn staking fees. To earn fees a user must maintain a particular collateralization ratio, or they will lose the fees earned. The staking fees are also locked for a year. SNX has a fairly low supply at 173 million. It has a significant marketcap, but has many improvements planned including leveraged trading on assets.
*Please do you own research, before purchasing any cryptocurrencies. I’m not a financial advisor. This is just a starting point for you to work from.