As we move into 2024, finance will be about decentralization.
Decentralized Finance (DeFi) is one of the biggest and most exciting trends in the blockchain industry, with many believing it will overtake traditional finance in the coming years. This growing financial sector relies on the promise of robust, decentralized support networks that promote innovation (both financial and technical) that could fundamentally disrupt how we think of money exchange.
At the forefront of this movement is the collection of DeFi platforms that support crypto and blockchain projects, facilitate transactions across blockchains, and serve as a trading hub of sorts for investors around the world.
With that said, we must understand that DeFi platforms hold both peril and promise. In this guide, we’ll cover the top 10 DeFi platforms for 2024, looking at both the potential risks and rewards.
Beyond TVL: How We Rank DeFi Platforms
When our analysts assess DeFi platforms, they use criteria that articulate the “trust factor” of these platforms, such as year of launch, community following, and Total Value Locked (TVL) in supported protocols.
- Even though DeFi is a young industry, we’re looking for platforms that have stood the test of time (relatively speaking), typically with a large user base and significant value.
- Total value locked is like money “locked” in traditional mutual funds or CDs. This metric does matter, representing the sum of funds available to a DeFi platform, like a bank’s lending and borrowing capacity. But many DeFi projects quickly attract a lot of capital and then promptly flame out as users leave the service, rendering TVL a less-than-useful metric. This is slightly different from other analysts. Most DeFi rankings look exclusively at Total Value Locked, which can be misleading. The DeFi industry has nearly $44 billion locked in apps.
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 that we would look at a bank’s history and customer happiness, not just its size.
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 executed using smart contracts.
While Aave doesn’t have the largest TVL (Lido takes that award), it does have the greatest transaction volume and the longest history of any platform in our list, giving it the edge over other platforms.
Year Launched: 2017
Blockchain: Ethereum
Services: Borrowing and Lending
Total Value Locked: $5,490,000,000
Community Following: 549,500
BMJ Score: 4.5
Check out BMJ’s Aave Investor Scorecard here.
Lido (LDO)
Lido was launched 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 locking assets or maintaining staking infrastructure.
Since Ethereum has switched to Proof-of-Stake Lido has exploded. It’s huge TVL lands it very near the top of our ratings.
Year Launched: 2020
Blockchain: Ethereum
Services: Liquid staking
Total Value Locked: $16,360,000,000
Community Following: 269,000
BMJ Score: 4.0
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 on supply and demand in a liquidity pool, removing middlemen and intermediaries.
Uniswap is one of the earliest DeFi platforms and has a huge user base, giving it a very strong showing in our ratings.
Year Launched: 2018
Blockchain: Ethereum
Services: Token Exchange/Lending
Total Value Locked: $3,310,000,000
Community Following: 4,500,000
BMJ Score: 4.0
Check out BMJ’s Uniswap Investor Scorecard here and Risk scorecard here.
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 Collateralized Debt Position (CDP) by locking up ether (ETH) or other Ethereum assets as collateral to receive DAI as a debt against the locked-up assets. The platform uses the MKR token for interest payments, and the DAI and MKR paid are burned once the CPD is closed out.
With its focus on borrowing and lending, along with a connection to DAI and a long history, Maker ranks very highly.
Year Launched: 2018
Blockchain: Ethereum
Services: Borrowing and Lending/Stablecoin
Total Value Locked: $4,950,000,000
Community Following: 261,000
BMJ Score: 3.5
Check out BMJ’s Maker Investor Scorecard here.
PancakeSwap (CAKE)
PancakeSwap is a popular decentralized exchange providing token trading alongside features like staking and liquidity pools. The DEX is based on the BNB Chain, formerly the Binance Smart Chain.
While PancakeSwap is relatively new, it has a huge following. Its prominent place in the Binance ecosystem makes it a good choice for Binance users.
Year Launched: 2020
Blockchain: BNB Chain
Services: Trading, Staking, Yield Farming
Total Value Locked: $1,100,000,000
Community Following: 2,000,000
BMJ Score: 3.5
Check out BMJ’s PancakeSwap Investor Scorecard here.
Curve Finance (CRV)
Curve finance is a decentralized exchange protocol where 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 the bid and ask price spreads, incentivizing users to add their funds to the overall pool and earn interest.
Curve is another relatively new addition to the DeFi ecosystem. It’s large TVL helps lift it in our rankings.
Year Launched: 2020
Blockchain: Ethereum
Services: Borrowing and Lending/Decentralized Exchange
Total Value Locked: $2,401,000,000
Community Following: 354,600
BMJ Score: 3.0
Check out BMJ’s Curve Investor Scorecard here.
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 overall supply and demand of TRON assets decide the interest rates on fund pools.
While JustLend is focused on the Tron ecosystem, this hasn’t kept it from amassing nearly $6 billion in TVL. While the community following is small it is a great choice for anyone focused on the Tron ecosystem.
Year Launched: 2020
Blockchain: TRON
Services: Borrowing and Lending
Total Value Locked: $5,795,000,000
Community Following: 58,600
BMJ Score: 3.0
Compound (COMP)
Compound Finance is an Ethereum-based, open-source money market protocol that enables users to borrow or lend against collateral. Anyone can participate in Compound’s liquidity pool and start to earn interest on their digital asset holdings. The interest rates adjust according to the supply and demand on the platform. Compound supports DAI, ETH, and USDC, among other digital assets.
Compound remains a popular choice for borrowing and lending, but is overshadowed by larger competitors Maker and Curve.
Year Launched: 2018
Blockchain: Ethereum
Services: Borrowing and Lending/Stablecoin
Total Value Locked: $2,070,000,000
Community Following: 850,000
BMJ Score: 2.5
Check out BMJ’s Compound Investor Scorecard here and Risk scorecard here.
Convex finance (CVX)
Convex Finance is a DeFi protocol built on Curve finance. Convex protocol maximizes yields by streamlining the boosting experience. Curve LP (liquidity pool) providers can claim boosted CRV (Curve DAO Token) and earn trading fees without locking CRV. 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.
Convex is a smaller service due to its ties with Curve. If you’re a frequent Curve user then Convex could be a good choice for you, but its niche status led us to rank it somewhat lower.
Year Launched: 2019
Blockchain: Ethereum
Services: Assets
Total Value Locked: $1,710,000,000
Community Following: 54,800
BMJ Score: 1.5
InstaDApp (INST)
Popularly known as the “DeFi Smart Layer,” InstaDApp is a DeFi app based on the Ethereum network. It is 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.
While InstaDapp is a great service it hasn’t really caught on as users seem to prefer interacting directly with their lending, borrowing and staking apps rather than using a third-party service.
Year Launched: 2019
Blockchain: Ethereum
Services: DeFi Token, DeFi Smart Accounts
Total Value Locked: $1,970,000,000
Community Following: 47,700
BMJ Score: 1.5
What Is Decentralized Finance?
Decentralized finance (DeFi) refers to websites that offer “decentralized” financial tools and services such as investing, borrowing, lending, trading, tokenized real estate, and insurance.
DeFi is a counterpart to traditional finance services, typically centralized through a bank or similar institution. Whereas conventional finance will rely on these institutions to facilitate transactions between parties, DeFi decentralizes these transactions as peer-to-peer through blockchain technology.
There’s a lot of potential in the DeFi space, and the data from the last three years 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 22 months.
By 2022, the crypto bull run had run its course, and a crypto winter hit the market hard. Although DeFi was also affected (TVL had dropped to just around $42 billion), the numbers remain significantly higher than in 2020.
But, even as centralized platforms like FTX have collapsed, the allure of DeFi remains strong. TVL surpassed $50 billion in Q1 2023, indicating sustained interest in decentralized crypto platforms.
Liquid staking projects, in particular, have thrived in the past year. With a current TVL of $17.67 billion, this market sector has returned almost 300% over the past 12 months. Over the next decade, the DeFi market is expected to surpass $232.2 billion, with a CAGR of at least 42.6%.
How Do I Get Involved with DeFi Platforms?
There are various ways to get involved with DeFi platforms:
- Earning Yield: One way to earn “interest” on your crypto assets is by depositing them in DeFi platforms such as Aave or Compound, which will pay you an Annual Percentage Yield. (See our current list of Best 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 rewarded in the DEX’s in-house token, which may increase in value, like owning “stock” in the company. (See our list of Top Dex Aggregators.)
- Trading on DEXs: Decentralized exchanges let people directly trade with each other, unlike centralized exchanges. You can often trade smaller coins on DEXes you won’t find in centralized exchanges.
The sustained interest in DeFi projects is encouraging for crypto investors. With the constant innovation and evolution of these decentralized financial services and the addition of new protocols, the DeFi space remains one of the most exciting areas to watch.
Investor Takeaway
DeFi isn’t just randomly buying crypto and YOLO’ing for the best. It’s seeing opportunities in new markets and technologies and supporting well-managed organizations doing the same.
As the federal government argues over regulations and new designations for these assets, the role of DeFi in organizing and facilitating investments will just grow.
The platforms covered here are major players in the game. However, investors must do their due diligence and understand their expectations and needs before deciding on investing in any of them.
The fundamentals are here, and the future looks bright for DeFi.
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