Two months ago, Anchor Protocol collapsed. At the end of the day, $ 14 billion flew away. And since then, the banknote has become longer. What are these decentralized financial protocols and what are they used for?
On May 8, 2022, the Anchor Protocol cryptocurrency weighed in at as much as $ 14.75 billion. Two months later in the day, its total value locked (indicator of the strength of a DeFi protocol) fell by 99% to $ 1.7 million. Nearly $ 15 billion missing …
With the fall of Anchor, the crypto world entered a violent bear market, and the value of these DeFI protocols (for decentralized finance) has been in free fall for several months. But what are these decentralized finance protocols that are (or were worth) billions worth? Who are they and what are they for? Most of them are used to borrow or exchange cryptocurrencies, with returns that amaze you but that should not make you forget the extreme volatility of the assets.
To move on, JDN wanted to investigate it and had to repeatedly try to establish a top 10: Within a few weeks, some left the rankings (Instadapp), others joined it (WBTC), and for most of them, TVL ‘s are plunged. Example with MakerDAO, which has lost half of its value since April 8, 2022, going from $ 15.21 billion to $ 7.7 billion. Hop, another $ 7 billion is gone. Here are the 10 most valued crypto protocols, obtained not without problems.
1. MakerDAO: $ 7.74 billion
MakerDAO is a decentralized credit platform: borrowers deposit assets placed on the Ethereum blockchain as collateral and receive in return 66% of the sum in Dai, a stable currency indexed to the US dollar, highly valued by the crypto ecosystem to execute transactions. The debt incurred in Dai leads to the payment of interest with an annual interest rate of 1% in MKR, Makers crypto, which allows investors who have made their Dai available to be paid.
2. Aave: $ 6.68 billion
Aave is a decentralized credit protocol. Depositors provide liquidity to the market, while borrowers can take out a loan equal to 75% of the value of the collateral they provide. The yield of all delivered crypto assets is adjusted automatically and algorithmically based on supply and demand in the protocol.
3. Wrapped Bitcoin: $ 5.65 billion
Wrapped Bitcoin provides tokens on the Ethereum blockchain supported by bitcoin in a 1: 1 ratio: WBTC. Supporting cryptocurrencies from different blockchains can be costly due to transaction fees. With Wrapped BTC, wallets and payment applications only need to manage Ethereum tokens, even for bitcoin transfers.
4. Lido: $ 5.36 billion
Lido is a deployment platform (a blockchain validation mechanism). Investors deposit their cash on the platform, in return they receive between 4 and 20% APR (annual gross return) paid in exchangeable tokens: a st-token that maps its value to the value of the cryptocurrency invested. They can then trade these new tokens on platforms like Curve.
5. Curve: $ 5.28 billion
Curve offers swaps of stack coins, tokens that maintain parity with national currencies. The liquidity pools available on the platform consist of several tokens and remunerate the liquidity providers in CRV, the Curve token. The size of the annual return varies depending on the daily trading volume and the total liquidity available in the pool. The investor who wants to trade cryptocurrencies is exposed to the risk of an increase in APY and therefore an increase in interest.
6. Uniswap: $ 5.21 billion
Uniswap is a trading platform for cryptocurrencies. Its special character: to be a DEX, for decentralized exchange, that is, tokens are exchanged directly between users’ wallets. The platform has no reserves, but it needs liquidity. It thus provides rewards to those who lock their money on the platform. Its use entails more responsibility for the users.
7. Convex Finance: $ 3.43 billion
To understand how Convex Finance works, it needs to be linked to Curve. Users can lock (forever) CRV, Curves token, against cvxCRV, Convex’s synthetic token, to increase the pool of liquidity they borrowed from Curve. This manipulation allows them to obtain boosted rewards, to which is added the return from Curve.
8. Pancakeswap: $ 2.88 billion
Pancakeswap is a trading platform for cryptocurrencies and like Uniswap it is a DEX. The advantage: users have access to tokens before they are listed on CEX (centralized exchange), where the exchanged cryptocurrencies are contained by the platform and not directly by the users. It is recommended to make purchases of small amounts because the price is algorithmically rebalanced after each transaction: this is the slip tolerance.
9. JustLend: $ 2.86 billion
JustLend is a decentralized credit-only platform for Tron blockchain tokens. Liquidity depositors can get an APY between 0.25% and 21.86% depending on the tokens. Borrowers incur debt in jTokens against collateral on deposit. While interest rates are traditionally determined every day, it is updated on Justlend every 3 seconds in line with market variations using an algorithm.
10. Composite: $ 2.77 billion
Compound is a decentralized credit platform. Interest rates are calculated on the basis of market dynamics. To take out a loan, borrowers must provide collateral. Interest received by depositors is paid in the form of c-tokens.