DeFi -Decentralized Finance on dark blue abstract polygonal background. Concept of blockchain, decentralized financial system
Despite the crypto market being faced with a lot of bearish pressure over the last few months, the decentralized finance (DeFi) industry has continued to pique the interest of many investors across the globe. As of September 1, 2022, the DeFi sector has $60B worth of capital locked across its many associated protocols.
Conservative estimates suggest that over the course of the next five odd years (i.e., by 2028), the total market size of the DeFi sector is set to reach a cumulative valuation of approximately USD $508B, growing at a steady compound annual growth rate (CAGR) of 43.8%.
This is largely because DeFi platforms help eliminate the need for any middlemen — such as brokerages and banks — thanks to the use of self-executing smart contracts that allow them to manage their loans, interest payments, etc. in a totally automated fashion.
In this article, we will look at some of the best DeFi projects that people should look out for in 2023, so without any further ado, let’s jump straight into the heart of the matter.
Aave is a highly popular decentralized finance platform that allows users to borrow/lend several different digital assets in a completely peer-to-peer (P2P), automated fashion. The project uses a smart contract framework that makes essential financial services accessible to everyone globally, all without the need of banks, brokers, and other intermediaries.
At press time, the platform offers 26 crypto assets that can be deposited in return for handsome returns. 25 of these assets are available for borrowing. These assets include prominent ones such as Ethereum, Chainlink, USD Coin, Aave (LEND), amongst others.
Fantom is an open-source smart contracts platform designed to simplify the process of borrowing, lending, and trading of synthetic assets. Simply put, synthetic assets are tokenized blockchain-based derivatives of an underlying asset — i.e., a mix of traditional derivative assets and digital currencies.
From a feature-driven perspective, Fantom has gained an increasing amount of traction recently because it can provide a solid mix of security, stability, and decentralization — commonly referred to as the blockchain trilemma.
Lastly, thanks to its use of a propriety consensus mechanism referred to as ‘Lachesus’ it can deliver extremely fast transaction speeds and a robust dApp development environment. Economically, a single transaction on the network costs just a fraction of a cent, making it extremely attractive to those users looking to process voluminous, multiple transactions.
Over the last couple of years, the issues of scalability and ‘true decentralization’ have continued to plague the DeFi market. Radix is an asset-oriented smart contract platform looking to tackle these problems using its native consensus mechanism called ‘Cerberus’. The ecosystem comes packed with many unique functional features that allow it to scale as per the pervading market conditions and achieve a high degree of data throughput irrespective of its existing network traffic.
Radix has demonstrated extremely fast transaction speeds, far surpassing those offered by other prominent ecosystems like Ethereum, Cardano, and Polkadot. On a technical note, during live trials, Radix has achieved transaction rates of 1 million TPS. This is, in large part, thanks to the Radix Engine, which is Radix’s execution environment. It uses structured finite state machines (FSMs) to manage tokens and other assets — referred to as resources. Resources are governed by platform-level rules, giving developers a useful set of building blocks that usually take smart contract developers a lot of time to implement and test on other networks. As a result, they are relieved of a massive burden and can focus on creating dApps that can facilitate complex DeFi transactions easily.
Lastly, Radix utilizes efficient smart contracts that have been designed to function as assets and therefore be used for the modeling of real-world economic systems. Additionally, the project utilizes an asset-oriented coding language (Scrypto), as a result of which it requires a lot fewer lines of code when compared with Ethereum’s Solidity.
Avalanche is a smart contract DeFi platform that has gained a lot of notoriety among crypto users over the past year or so, especially amongst nonfungible token (NFT) enthusiasts. The project lays a lot of importance on cross-chain interoperability, as is highlighted by the fact that it has devised digital bridges linking it with many blockchain ecosystems, including SushiSwap (SUSHI), Chainlink (LINK), and the Graph (GRT).
Since making its way into the market, Avalanche has continued to position itself as a direct competitor to Ethereum, largely due to its ability to facilitate cheaper transactions that can be processed within seconds. Lastly, Avalanche recently concluded a massive funding round worth $230 million to support a wide array of DeFi initiatives.