The Total value locked (TVL) in DeFi protocols is currently 72 billion dollars worth of assets. At the peak of the bull run, TVL was around 230 billion dollars. DeFi protocols have worked frictionless and smooth during the previous quarter’s downtrend. So, if you have been thinking of investing in DeFi tokens, here is a list of the top 5 DeFi tokens of the week. These protocols are performing well during this bear market also.
Top 5 DeFi Tokens of the Week
1. ThorChain
Based on Tendermint and Cosmos SDK, ThorChain is a decentralized cross-chain liquidity system. It merely decides how to move assets in response to user activities; it does not peg or wrap items. As a leaderless vault manager, THORChain makes sure that each step of the process is byzantine-fault tolerant. The main goal of THORChain is to provide cross-chain liquidity while preventing centralization and capture. Only the assets stored in THORChain’s vaults are secured, and the security of those assets is backed by financial assurances. The THORChain ecosystem is powered by the token RUNE, which also offers the financial incentives needed to keep the network safe. The four crucial roles for RUNE are:
Liquidity (as a settlement asset)
Security (as a Sybil-resistant mechanism, and a means for driving economic behavior)
Governance (signaling priority on-chain)
Incentives (paying out rewards, charging fees, subsidizing gas)
RUNE is used for network transaction fees. Both a fixed network price and a dynamic slip-based fee are applied to all swaps.
2. Uniswap
On the Ethereum blockchain, cryptocurrencies can be exchanged using the Uniswap protocol. In order to promote censorship resistance, security, and self-custody, the protocol is built as a collection of persistent, non-upgradable smart contracts. It is also intended to operate without the use of any trusted intermediaries who might arbitrarily impose access restrictions. The Uniswap protocol currently exists in three versions. Both V1 and V2 are open source and GPL-licensed. Concentrated liquidity—liquidity that is distributed within a specific price range—is the key concept of Uniswap v3. In previous iterations, liquidity was dispersed uniformly between 0 and infinity throughout the price curve. The Uniswap community treasury, the Uniswap protocol governance, and the protocol fee switch are all controlled by the ERC-20 token UNI on the Ethereum network (0.05 percent of the fee would be collected by UNI token holders if activated).
3. Aave
Users can engage in Aave, a decentralized non-custodial liquidity system, as depositors or borrowers. Borrowers have the option of borrowing in an overcollateralized (perpetually) or undercollateralized (one-block liquidity) method, while depositors offer liquidity to the market in exchange for passive income. The amount you can borrow up to depends on the value you have deposited and the liquidity that is readily available. For instance, if there isn’t enough liquidity or if your health prevents it, you can’t borrow an asset. Transacting with the protocol necessitates fees for using the Ethereum Blockchain, which is based on the network’s health and the intricacy of the transactions. Gas expenses have been reduced for all necessary functions with Aave V3. Across the board, gas prices have decreased by about 20–25%.
4. Synthetix
Built on Ethereum and Optimistic (a layer two scaling solution built on Ethereum), Synthetix is a DeFi platform for issuing synthetic assets. The Synthetix Network Token (SNX), which when locked in the contract authorizes the generation of synthetic assets, serves as security for these virtual assets (Synths). Users can make conversions between Synths directly through the smart contract using this pooled collateral architecture, doing away with the requirement for counterparties. The liquidity and slippage problems that DEXs have are resolved by this approach. Currently, Synthetix supports fictitious fiat money, long and short cryptocurrency positions, and commodities. On top of the Synthetix architecture, numerous protocols have developed. Kwenta, which provides spot exchanges and perpetual futures, Lyra, which provides options trading, Curve, which provides cross-asset swaps, and dHEDGE, which enables investors to pool their funds and provides a decentralized hedge fund service. Owners of SNX are encouraged to stake their tokens because integrators pay them a proportionate share of the fees made from activity on Synthetix (Kwenta, Lyra, Curve, dHEDGE, and many others). The value of the SNX token is derived from the privilege to participate in the network and capture fees made from Synth exchanges. Having SNX is not necessary in order to trade on the Synthetix network.
5. Lido DAO
A group called Lido DAO creates liquid staking services for Ethereum. Lido enables users to gain staking benefits without maintaining staking infrastructure or locking assets. Users can stake ether in Lido smart contracts and obtain tokenized staked ether in the form of stETH. The tokens are subsequently staked by the DAO-controlled smart contracts with the DAO’s chosen node operators. The DAO is in charge of the money that users deposit; node operators never have access to the money directly. The stETH token can be transferred at any moment and is not subject to the restrictions associated with a lack of liquidity, unlike staked ether. The entire amount of staked ether will be multiplied by rewards and deducted from any slashing fines to determine the balance of the stETH token. The project’s native token is LDO. Various use cases of the LDO token are:
Governance: Users can vote on ideas to determine important factors including fee structures, node operators, and oracle assignments.
Value Accrual: The DAO, a slashing insurance fund, and node operators each receive 10% of the earnings from staking. The Lido DAO gains value by obtaining 5% of all real-time staking payouts.
Liquidity Incentive: In exchange for LDO rewards, users can lend liquidity to the liquid-staking tokens.
Conclusion
So, these were the top 5 DeFi tokens of this week. These protocols are leaders in their service category of DeFi. However, these protocols need to make some changes in tokenomics to better serve the token holders. Also, token holders need to participate actively in governance. If these protocols will keep on innovating, it will not be easy to replace them. Network effects and strong development teams are the reason for the success of these protocols.
