Decentralized Finance (DeFi) vows to fill the rift that lacks in traditional banking, because of which it has become one of the hottest trends to rise out of the crypto markets. Now, it serves as the new financial service enabler and fulfills the mass adoption requirements of Blockchain and cryptocurrency.
Because of the uptick in DeFi lending platforms, there have been some of the biggest developments in the cryptocurrency industry. It has been the fastest developing sector and has been unwaveringly mounting for several years.
Its popularity began in the summer of 2020 when the rates of various tokens belonging to DeFi platforms increased tremendously. There are numerous top DeFi lending platforms that you can choose to trade but ensure thorough research before choosing one.
Top 15 DeFi Lending Platforms (2021)
DeFi Lending and Borrowing
- Just like conventional peer–to–peer lending platforms, DeFi lending platforms facilitate its users to lend their assets to others. In exchange, they get interest payments. As these platforms usually deal in cryptocurrency, they get the interest payments in crypto only. DeFi platforms operate without any middlemen; hence, the financial rewards are sent straight away to the users.
- The good part about this platform is that any individual can take a loan without undergoing any KYC or AML checks, plus they don’t need to disclose their identity to a third party. This makes financial services more accessible.
- DeFi platforms are more secure than centralized lending platforms because of the usage of Blockchain.
- You need to provide collateral valued more than the value of the loan as DeFi platforms are anonymous.
Why Decentralized lending?
The top Ethereum DeFi platforms gave finance a new meaning. It offers numerous lending opportunities and advantages to lenders. Some of the advantages of decentralized lending are:
a) Hedge Funding- The cryptocurrency space is versatile that usually emits investors packing. Hence, if, as an investor, you do not want to get burnt in the market and want to avert the price swings, then DeFi renders you an opportunity to hold crypto for a specific time. It also empowers traders to invest crypto for fiat to fulfill other necessities without selling off.
b) Earn interest in holding crypto assets- You do not need to sell your crypto to avoid the bears; instead, you can lend them at good interest rates stated in a contract. Within the defined time, you earn money plus the interest as well.
c) Less paperwork- Unlike the traditional centralized banking system, DeFi platforms do not require much documentation. It is the process of a few clicks through a Decentralized application.
How does DeFi Lending work?
Decentralized lending is pretty simple, just like putting your hand in your pocket to lend money to someone. But, the smart contract and decentralized application signify both your mediators and negotiators. Let us understand this by an example, if you want to give a $30000 loan via DApp, you would have to do a few clicks, and it is done.
The entire process is very simple and straightforward, as you need to select any DApp application that grants a smart contract and borrowers. You need to decide the loan’s interest rate, put it in the app, and lending is on the way. Once you find the borrower, the smart contract would automate both the lending and borrowing agreement.
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Best DeFi lending platforms
Whether you are a borrower or lender, it is paramount for you to pick the correct platform. You should always look into the major factors such as interest rates and see if it includes the assets you want to borrow or lend and the safety and security level.
Here is the list of top DeFi lending platforms that have been made after intensive research; you can choose one as per your requirements:
It is a decentralized, open-source, and non-custodial liquidity market protocol where you can participate as a lender and borrower both. It is created on Ethereum that offers borrowing within a smooth and user-friendly interface. It renders a dual DeFi token model, i.e. aToken and LEND.
aToken model is an ERC-20 token where lenders interest compound and LEND is a governance token where you get numerous types of loans and lending services like rate switching, uncollateralized loans, Flash loan, and much more.
Aave was formerly known as ETHLend and is a London-based company launched in 2017 by Stani Kulechov. It rebranded to Aave in September 2018, with the mainnet going live in January 2020. Aave was started with a $60,000 value of ETH tokens that were traded in replacement for LEND tokens through an ICO.
As of now, it has more than $5 billion locked up in its smart contract; all this is because, with them, you begin earning interest immediately that compounds in real-time.
It is a decentralized borrowing and lending platform that has become one of the best DeFi lending platforms in the market today. Maker is usually known as Multi-Collateral DAI (MCD) system. It has more than $7 billion tokens locked in smart contracts.
The Maker has two main assets: MKR and DAI, and both of them are ERC-20 tokens. DAI is pinned with the dollar for lending and borrowing once the smart contracts are adhered.
DAO is a decentralized lending application on Ethereum blockchain that supports the DAI, a stable coin pegged to the US. It also lets the users who have access to ETH and MetaMask lend in the structure of DAI.
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It was launched in 2015 to overcome the volatility of cryptocurrency. It is created on Ethereum and is supported by holders of MKR governance tokens; they have the power to select the protocol’s future by voting for or versus the proposal to modify the platform.
Maker renders its users a 9.05%, 4.6% interest rate, and 30D average rate. Thus, you can borrow on the Maker protocol if you are ETH, WBTC, USDC, and BAT holder.
It is one of the most well-liked decentralized exchanges that is developed on the Ethereum network. It enables the users to swap between ETH and ERC-20 token on-chair or earn a fee by offering any amount of liquidity; thus, it uses liquidity pools for token swaps. The good part is that, as of now, there are no limit regulations on Uniswap.
Exchange of ERC20 tokens is done by a very easy user interface in a private, unharmed and non-custodial way. You can swap any ERC20 token on this platform or provide liquidity to the process and earn a fee. In addition, you can either add liquidity to a current pool or build a new pool.
A unique and freely transferrable ERC20 token presents every liquidity pair. Therefore, you can effortlessly create a liquidity pool on Uniswap; all you need is to provide a token pair for markets. Exchange rates are fixed by the market makers that utilize its regular product market maker mechanism.
Hayden Adams was the founder of this decentralized lending platform. It was originated in November 2018, and since then, it has steadily been rising.
As of now, there is $4 billion worth of Ethereum tokens enclosed in Uniswap liquidity pools.
This decentralized money market protocol permits borrowers and lenders to secure their crypto assets into the contract. It is based on the Ethereum blockchain that grants digital asset holders to borrow and lend crypto against security.
It is somewhat different from other DeFi lending platforms as it lets the tokenization assets locked in their system by the usage of cookies. In addition, users also have the option to add assets to their liquidity pool and start earning compounding interest.
Compound allows the users to take out over-collateralized loans and maintains several assets, plus it has been reviewed and formally verified. It sets aside 10% of the interest paid as reserves, and the remaining amount goes to the liquidity suppliers.
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It was launched in September 2018, a San-Francisco-based platform that big investors support. Compound upgraded with the protocol in May 2019. In May 2020, they impelled towards decentralization, skirting governance to COMP token holders.
To date, they have more than $6 billion locked up in its liquidity pools, which makes it one of the most well-known DeFi platforms out there.
It is a reliable smart wallet for decentralized finance. The good part is that it is a multi-purpose platform that manages digital assets pretty well. InstaDApp lets its users optimize, manage and position the assets and get the best returns across numerous protocols.
With this platform, you can get several services such as borrowing, lending, leverage, swap, etc. It is just like a bank that lets you integrate services to serve your purpose. It has a very simple user interface that enables its users to manage their DeFi investments across and switch to cheaper lending platforms with lower interest rates like Compound, Maker, etc.
They also grant you a smart wallet portal for DeFi protocols. The highlighting thing about InstaDApp is that it is free to use; all you need to have is enough ETH for the transaction fee.
InstaDApp was founded by Samyak Jain and Sowmay Jain in August 2018. It launched on the Ethereum mainnet in December 2018 and released its new version lately in April 2019.
As of now, over $1 billion are secured in InstaDapp smart contracts.
It is a non-custodial trading platform on Ethereum that is geared towards experienced traders. It bought margin trading, derivates, and options to the blockchain space usually found in fiat markets and common for conventional investments.
dYdX is one platform where you can easily lend, trade, and borrow DAI, ETH, and USDC. Plus, it also gives its users cross margin trading and isolated margin trading using a perpetual market contract of BTC/USDC of 10x leverages. Unlike other DeFi lending platforms, the good part is that it does not have a native token like charging trading fees in the supported tokens.
They provide loans on 125% collateral and 115% self-liquidation. More than $35 million a day are traded on dYdX, making it one of the world’s leading decentralized exchanges for crypto assets cryptocurrency derivates.
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Based in San Francisco, dYdX has a company size of 25 to 50 people. It markets financial services, blockchains and cryptocurrencies. It was launched in October 2018 by Antonio Juliano. Their exchange runs on open-source code that everyone can access.
It is software that operates on Ethereum and endeavors to incentivize a network of users to run a platform where users can purchase and market crypto assets. It is very similar to UniSwap; the only significant difference is the open-source code.
It also uses a collection of liquidity pools for achieving its goals. You can also make your own liquidity pool by offering ETH and ERC20 of your choice and can also swap out one token for another. Its user interface is very straightforward as users need to lock up their assets into smart contracts and traders then trade cryptocurrencies from those pools.
The unique thing about SushiSwap is that it enables its users to trade cryptocurrencies without the requirement for a central operator administrator. Thus, the decisions related to it are made by holders of its native cryptocurrency.
SushiSwap was launched in 2020 by a pseudonymous individual called Chef Nomi, along with co-founders sushiswap and 0xMaki. They copied the open-source code created by UniSwap for creating its foundation. After that, they attracted more and more customers to their platform by offering Sushi token rewards if they locked up funds in a pool on Uniswap. Once the code for SushiSwap was ready, the funds in that pool would be transferred to SushiSwap.
SushiSwap has over $4 billion fastened in its trading pools. It has risen as one of the top Ethereum DeFi platforms that let you trade digital assets without the requirement of any agents.
8) Dharma Protocol
It is a tokenized debt and decentralized finance application that operates on the Ethereum blockchain. Here the moneylenders, borrowers, and other fund managers can exchange and transact with each other. It is a component of decentralized finance products that attempts to democratize entree to financial services.
It consists of a Dharma Settlement contract that apes the traditional financial instruments and stakeholders. Four significant agents operate this network: lenders, borrowers, relayers, and underwriters.
The simple operators are both lenders and borrowers, relayers are the agents that help borrowers find creditors to fill their loans, and underwriters are agents responsible for identifying the possibility of default and formatting the terms of the debt issue.
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Nadav Hollander founded the dharma protocol in 2017. It was launched to democratize access to lending products by its decentralized lending platform. They allow a transaction of $1000 in a day, and dollar deposits can earn around 2.7% APR through the compound protocol.
A sum of $13 million has been locked up in the protocol.
9) Curve Finance
It is a decentralized exchange and liquidity pool created on Ethereum for effective stable coin selling. It enables users to trade with very little slippage swaps of stable coins and a low fee algorithm. Curve Finance also supplies liquidity to other protocols like Compound, etc., and generates income for liquidity providers.
The liquidity in this protocol is split across seven curve pools, which are Compound, PAX, BUSD, Y, REN, sUSD, and sBTC. Every pool mints its own specific ERC20 tokens to liquidity providers that can be exchanged for various distinct assets.
Curve Finance was founded by Michael Egorov and was launched lately in January 2020. This system was designed to offer extremely efficient stables coin trading.
With over $4 billion value of digital assets secured in its liquidity pools, Curve Finance has graced as one of the top DeFi lending platforms.
It is an automated market-maker built on the Ethereum network that enables you to buy a token at the best prices and swap them directly. You can also create customizable liquidity pools or add existing pools to earn a fee from trading.
It is different from other decentralized lending platforms as their liquidity pool comprises only two assets, whereas the pool of Balancers comes with eight digital assets for improving liquidity. Another highlighting part is that it empowers any weight of any number of tokens within a pool.
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The pool’s design is determined solely by the creator and can also be customized as per their requirements. It has different type of pools-
- Private pools are for private purposes and can only add liquidity from the pool owner only.
- Shared pools offer no special rights to the pool owners, and anyone can add liquidity to the shared pools. In this, the fee and weights are set that remain permanent.
- Smart pools are alike private pools, but the major difference is that smart contracts control them. Here also, anyone can add liquidity.
It is an Ethereum based decentralized platform created for DeFi lending, margin, and leverage trading. bZx is a great alternative to dYdX. It differentiates itself by providing a smart-contract-powered token system. It allows the users to trade and lend crypto assets by tokenized loans and tokenized positions.
It is different from other DeFi platforms because here, the relayers match borrowers’ and lenders’ orders so that borrowers may get margin loans. Their system has mainly 3 core ERC20 tokens which are iTokens, pTokens, and BZRX tokens. Lending and borrowing depend on the first two tokens, while governance relies on BZRX.
They charge lenders a fee of 10% on their earnings and aggregate it into the funds to make sure that lenders are safe and covered even if the borrowers do not pay back the loan.
It was launched in 2018, and its founder is Tom Bean and Kyle Kistner. bZx was rebranded, and it integrated two more platforms: Fulcrum Trade that was launched in June 2019, and Torque in October 2019. As of now, their team has 13 members, followed by a list of influential partners and collaborators.
It is built on the bZx base protocol that supports Ether (ETH), Kyber Network Token (KNC), Chainlink (LINK), Wrapped Bitcoin (WBTC), and Tether USD. It is one of the most simple and powerful methods to lend and margin trade.
Here the lenders and borrowers place an order through a relayer, and once it is matched with the lender, the borrower will get the margin loan. This platform is a trustless platform for margin as it does not uses a centralized price fee. The good thing is that it is rent-free and permissionless, which means that you do not have to pay any fee.
They also have the feature of off-chain “bounty hunters” that monitor the solvency of every margin account; hence, if they see that there is a risk of borrowed funds being lost, they begin position liquidation and subsequent refund to the lender.
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It was initially conceptualized in August 2017, but it became live on June 1, 2019. It colludes with various big industry members such as MakerDAO, Kyber, ChainLink, Augur and Set Protocol. The chief executive of Fulcrum is Tom bean, who is well-known for his work in the automotive industry.
It is a decentralized ecosystem that aggregates lending services like Compound, Aave, and DyDx. They offer lending aggregation, insurance on the Ethereum blockchain, and yield generation.
The administration of this protocol is managed by a 9 member multi-signature wallet that necessitates a majority of members to agree on any suggested changes, and votes are listed on-chain. Therefore, changes must be signed by at least 6 out of 9 wallet signatures in order to get implemented.
They optimize the interest accrual process for end-users to make sure that they get the maximum interest rates. Using this platform, you can also deposit the assets and get them converted into tokens. It automatically rebalances your liquidity provider so that you get the highest profit by substituting liquidity with the most favorable lending service.
Andre Cronje founded it in July 2020. It rapidly enthralled the cryptocurrency space as it continued to surge from $3 to $30000 in a month. Its governance token YFI is assigned to users of the platform that offer liquidity with yTokens. It is one of the top DeFi lending platforms as there was no pre-mine before its launch.
It is an Ethereum based decentralized investment platform that was formerly a stable coin project named Havven. It enables its users to create and patronize synthetic assets or “Synths,” which offers on-chain exposure to tokenized, synthetic versions of physical assets.
These synthetic assets track the value of real-world assets and enable crypto holders to use their capital for trading non-crypto assets on a decentralized currency-based platform. It also has a native token that is called SNX. For minting the synths, users can lock the collateral in SNX or ETH. The good part is that synths are freely tradable ERC20 tokens.
Synthetix offers its users an option to trade more than 30 synths representing several commodities, stocks, gold, dollars, bitcoin and indices with plans to broaden the platform’s current derivate offerings. Trades also happen on the non-custodial platform but on a peer-to-peer basis.
Initially, it was called Havven but later, because of the changes in the direction and rebranding its name changes to Synthetix, with a mainnet launch in February 2019.
Synthetix has around $2 billion held in its liquidity pools to date.
15) CREAM Finance
It is a decentralized lending platform for both individuals and institutions to access financial services. For borrowing funds from Cream Finance, you would need to put the amount of cryptocurrency worth more than the amount of the cryptocurrency you will be borrowing in USD.
Cream Finance is a permissionless, open-source, and Blockchain agnostic protocol serving users on Ethereum, Binance Smart Chain, and Fantom. It makes money available in just a few clicks by recognizing the right borrowers using custom technological solutions.
The website of cream finance says that “It is a lending platform that is based on compound finance and an exchange platform based on Balancer Labs.” This means that the protocol of cream finance relies on source code from various other DeFi lending platforms that comprise UniSwap, Balancer, etc.
It was launched in August 2020and is one of the top Ethereum DeFi platforms globally. The founder of Cream Finance is Jeffrey Huang, and he says himself as the “Semi-benevolent dictator of Cream.” The enterprise is now in the process of converting to a community-governed decentralized independent company.
Q1) How do you DeFi?
It is pretty easy as all you need is to choose a DeFi platform that meets your requirements. Then, sign up on the platform, and then you can decide on borrowing, lending, trading, saving, etc., whatever you wish to do.
Q2) What is the DeFi pulse?
It is just like Coingecko, Coin Market Cap and other cryptocurrency resources. Hence, on DeFi pulse, you can get all the information about the DeFi statistics and market. Therefore, you should definitely use DeFi pulse as it offers you all the required information about the protocol.
Q3) Is BlockFi a DeFi?
There is a major difference between them as BlockFi is completely centralized, whereas DeFi is a decentralized system. Another difference is that you do not have your keys when you use BlockFi.
After reading about some of the top DeFi lending platforms, you must have got an insight that all of them are more or less different, which means one size does not fit all. Thus, choosing a DeFi platform would depend on the type of assets you possess, the kind of lending products you are searching for, and the anonymity level you would like to maintain.
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Therefore, choose wisely as the platform that is right for someone else might not be best for you. If you are not comfortable with any of the above platforms, you can also consider using a centralized crypto lending platform as well. Choose diligently and always remember, not your keys, not your coins.