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| “All intelligent investing is value investing — acquiring more that you are paying for. You must value the business in order to value the stock.” - Charlie Munger |
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In today's issue: Dive into DeFi, with the best platforms for generating yield on your crypto assets.
Last year, we did a deep dive on the top DeFi platforms for investors, but change is a constant in the blockchain world, and new platforms have emerged.
While the bear market of 2022 created challenges, DeFi platforms are still doing well, and the total value locked in those platforms remains higher now than the end of last year.
One of the factors helping DeFi late in 2022 was the collapse of FTX, which sent investors back to decentralization as protection from the known issues with centralization.
As you'll see, there are some new players in the space that are well worth investigating along with well established platforms that remain our top picks. For our updated research and ratings on the state of DeFi platforms, read on. |
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| | | Must Read Today's most important story for crypto investors. |
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Stablecoins are supposed to remain, well, stable. But that's not always the case as we saw this past weekend when one of the top stablecoins, USDC, lost its peg due to parent company Circle's connection to the failed Silicon Valley Bank.
Because Circle had $3.3 billion (8.25% of USDC's backing) held with SVB, investors panicked when the bank failed. They were worried Circle would be unable to meet redemption requests.
The Bankless piece looks at three questions around how markets reacted to the depegging of USDC:
Which other stables depegged (to either the upside or downside)? How did this crisis affect DeFi? Did anything break?
Most stablecoins experienced volatility. Those with ties to USDC (DAI and FRAX most notably) depegged to the downside, while those without ties depegged to the upside as investors fled to safe havens.
Despite the depegging of these stablecoins and a massive increase in volumes on major platforms as investors shifted assets, DeFi help up quite well during the crisis.
Investor takeaway: As the line increasingly blurs between DeFi and TradFi, investors need to be aware of events in traditional finance that could impact crypto markets as well. |
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New Investor Risk Scorecard - Compound!
Compound Finance is an Ethereum-based, open-source money markets protocol that enables users to borrow or lend against collateral.
Is COMP worth your investment?
Using our industry-leading Blockchain Risk Scorecard, our analysts put Compound through the wringer, squeezing out our final risk rating (remember that with risk, lower = better).
Premium members: Click here to download the scorecard (and don't forget to download our original Compound Investor Scorecard here).
Not yet a Premium member?Sign up now for just $10 a month and get access to the live event, plus our complete on-demand library of past workshops. |
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| Top 10 DeFi Platforms in 2023 by Preetam Kaushik |
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Decentralized finance (DeFi) refers to websites that offer “decentralized” financial tools and services like investing, borrowing, lending, trading, tokenized real estate, and insurance.
With centralized finance, a bank or financial institution usually sits in the middle to manage the money. With decentralized finance, it's done peer-to-peer using blockchain technology.
DeFi is one of the biggest trends in the blockchain industry, as many believe it will overtake traditional finance. The data from the last several years seems to validate this.
The total value locked (TVL) in DeFi protocols was under $1 billion in January 2020. Spurred by frenetic activity in the crypto markets during the COVID lockdowns, it surged to $248 billion by November 2021, a phenomenal 350x rise in a matter of 22 months.
By 2022, the crypto bull run had run its course, and the entire market was hit hard by a crypto winter. Although DeFi was also affected (TVL had dropped to just around $42 billion), the numbers still remain significantly higher than at any point in 2020.
As centralized platforms have collapsed, the allure of DeFi remains strong. TVL surpassed $50 billion in Q1 2023, indicating sustained interest in decentralized crypto platforms.
In this piece, our editors have researched the top DeFi platforms to identify the tokens worth a closer look for crypto investors.
Beyond TVL: How We Rank DeFi
Our editors use criteria that allow us to gauge the “trust factor” of DeFi websites like year of launch, community following, and total value locked (TVL) in the protocols. Even though DeFi is a young industry, we’re looking for platforms that have stood the test of time and that have large user bases and lots of value.
Most DeFi rankings look exclusively at TVL, which is misleading. The DeFi industry in 2023 has nearly $50 billion locked in apps. Think of this like money “locked” in traditional mutual funds or CDs. TVL matters as it represents the sum of funds available to a DeFi platform, like the lending and borrowing capacity of a bank. However, many DeFi projects quickly attract lots of capital, then flame out as users leave their services. So TVL is just one part of the picture. We also look for longevity, and the long-term ability to sustain a strong community of users in the same way we would look at a bank’s history and level of customer happiness (not just its size). |
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| Maker (MKR) The Ethereum-powered MakerDAO is a decentralized collateralized debt position (CDP) platform that supports the stablecoin DAI, which aims to maintain its value one-to-one with the US dollar. Users can open a CDP by locking up ether (ETH) or other ETH-based assets as collateral to receive DAI as a debt against the locked-up tokens. The platform uses MKR for interest payments, and the DAI and MKR paid are burnt once the CPD is closed out. Year Launched: 2018 Blockchain: Ethereum Services: Borrowing and Lending/Stablecoin Total Value Locked: $7,020,000,000 Community Following: 293,000 BMJ Score: 4.0 |
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Curve Finance (CRV) Curve finance is a decentralized exchange protocol on which users can swap and trade Ethereum-based assets. It also focuses on providing liquidity to the markets using a market-making algorithm that automatically buys and sells assets while profiting from bids and ask price spreads. This incentivizes users to add their funds to the overall pool and earn interest.
Year Launched: 2020 Blockchain: Ethereum Services: Borrowing and Lending/Decentralized Exchange Total Value Locked: $4,960,000,000 Community Following: 365,000 BMJ Score: 4.0 |
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Uniswap (UNI) Uniswap is a decentralized exchange on the Ethereum network that enables users to trade ERC20 tokens autonomously and swiftly. It does so through an algorithm that matches trades based upon supply and demand in a liquidity pool, removing middlemen and intermediaries.
Year Launched: 2018 Blockchain: Ethereum Services: Token Exchange/Lending Total Value Locked: $3,950,000,000 Community Following: 1,153,000 BMJ Score: 4.0 |
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| InstaDApp (INST) Popularly known as the “DeFi Smart Layer,” InstaDApp is a DeFi app based on the ETH network. It's designed to provide a single, easy-to-use access point to interact with multiple DeFi protocols. Instead of using 2-3 separate apps for lending, borrowing, or staking across protocols, InstaDApp allows users to do everything in one place. Year Launched: 2019 Blockchain: Ethereum Services: DeFi Token, DeFi Smart Accounts Total Value Locked: $1,910,000,000 Community Following: 47,000 BMJ Score: 4.0 |
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Lido (LDO) Lido was launched in parallel to the Ethereum 2.0 Beacon Chain as a liquid staking solution for Ethereum and other PoS chains. The protocol offers non-custodial staking services, allowing users to stake their tokens without having to lock any assets or maintaining staking infrastructure.
Year Launched: 2020 Blockchain: Ethereum Services: Liquid staking Total Value Locked: $9,150,000,000 Community Following: 134,000 BMJ Score: 3.5 |
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Compound (COMP) Compound Finance is an Ethereum-based, open-source money markets protocol that enables users to borrow or lend against collateral. Anyone can participate in Compound’s liquidity pool and earn interest on their digital holdings. The interest rates adjust according to the supply and demand on the platform. Compound supports DAI, ETH, and USDC, as well as other digital assets.
Year Launched: 2018 Blockchain: Ethereum Services: Borrowing and Lending/Stablecoin Total Value Locked: $1,450,000,000 Community Following: 253,000 BMJ Score: 3.5 |
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Aave (AAVE) Aave, formerly known as ETHLend, is an Ethereum-powered, decentralized, peer-to-peer marketplace for borrowing and lending digital assets. The peer-to-peer lending platform enables borrowers and lenders to agree on the loan terms that are then executed using smart contracts.
Year Launched: 2017 Blockchain: Ethereum Services: Borrowing and Lending Total Value Locked: $4,630,000,000 Community Following: 593,000 BMJ Score: 2.0 |
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Convex Finance (CVX) Convex finance is a DeFi protocol built on top of Curve finance. Convex protocol maximizes yields by streamlining the Curve boosting experience. Curve LP (liquidity pool) providers can claim boosted CRV (Curve DAO Token) and earn trading fees without locking CRV themselves. Users receive a token called cvxCRV when they deposit a certain amount of CRV tokens into Convex. Moreover, users can choose to stake cvxCRV tokens and receive CVX tokens as staking rewards along with a part of CRV rewards from Curve through Convex.
Year Launched: 2019 Blockchain: Ethereum Services: Assets Total Value Locked: $4,020,000,000 Community Following: 50,000 BMJ Score: 2.0 |
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JustLend (JST) The first-ever official lending platform on TRON, JustLend enables users to borrow and lend their assets and earn interest on deposits. The interest rates on fund pools are decided by the overall supply and demand of TRON assets.
Year Launched: 2020 Blockchain: TRON Services: Borrowing and Lending Total Value Locked: $4,400,000,000 Community Following: 57,000 BMJ Score: 2.0 |
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PancakeSwap (CAKE) PancakeSwap is a popular decentralized exchange that offers token trading along with additional features like staking and liquidity pools. The DEX is based on the BNB Chain, which was formerly known as the Binance Smart Chain.
Year Launched: 2020 Blockchain: BNB Chain Services: Trading, Staking, Yield Farming Total Value Locked: $2,460,000,000 Community Following: 1,600,000 BMJ Score: 1.5 |
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Getting Started with DeFi
There are a variety of ways to get started with DeFi:
Earning Yield: One way to earn “interest” on your crypto assets is by depositing them in DeFi platforms likeAaveorCompound that pay you annual percentage yields (see our current list ofBest DeFi Rates).
Liquidity mining: This allows users to earn yield for providing liquidity (capital) to a liquidity pool on a DEX (decentralized exchange). Users may also be paid rewards in the DEX’s in-house token, which may increase in value. It's a bit like owning “stock” in the company (see our list ofTop Dex Aggregators).
Trading on DEXs: Decentralized exchanges let people directly trade with each other (unlike centralized exchanges). This means you can often trade smaller coins on DEXs that you won’t find via centralized exchanges.
The sustained interest in DeFi projects is encouraging for crypto investors. With the constant innovation and evolution of these decentralized financial services, along with the addition of new protocols, the DeFi space remains one of the most exciting areas to watch. |
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Bitcoin Market Journal is a daily newsletter that makes you a better crypto investor. It's created by John Hargrave, Nick Marinoff, Steve Walters, Anatol Antonovici, Matthew Du, Daniel Joel, and Preetam Kaushik.
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