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The decentralized finance (DeFi) sector has been around for years now, but it was only in mid-2020 that the crypto industry became mature enough to start truly caring about it. Before that, DeFi projects like decentralized exchanges have had a major issue with the lack of liquidity, while staking wasn’t as popular and widespread as it is today.
Most people in crypto focused on investing and trading, seeking to earn large amounts of money over time, or small amounts as soon as possible, with only a few looking into ways of making passive income by staking their cryptocurrencies. However, with the development of DeFi protocols, combined with the creation of AMMs, and the shock that the COVID-19 pandemic brought to the world, people started looking into ways to earn money without risking losing it, as they would in trades and betting on the price movement.
These activities were never abandoned, of course, but the market reached the right state of mind and maturity necessary to take the next step and dedicate its attention to digital banking, which brought power to DeFi and its protocols and services. Now, a year and a half after DeFi exploded, the sector is still going strong. It did see a drop in TVL around the same time when crypto prices started crashing in November, but the market seems to be recovering, and DeFi does, as well.
So, with DeFi rising once again, here are some of the coins that we believe deserve your attention in January 2022.
1. Uniswap (UNI)
The first on the list is Uniswap, which should not come as a surprise, given that this is the largest decentralized exchange (DEX) in the crypto world. Based on Ethereum’s network, Uniswap was launched in November 2018, but it only came under the spotlight in mid-September 2020, and it kept growing as an exchange ever since.
Its token, UNI, also saw impressive performance during the first months of 2021, rising to nearly $44 in mid-May before crashing to $16 when the crypto market saw its biggest price crash since 2018. Since then, Uni has been fluctuating between $16 and $32, with its fluctuations becoming smaller and smaller over time. As of December 2021, the token’s support at $16 broke, and it dropped below it, when it started acting as a resistance.
Uniswap became a popular decentralized trading protocol known for its role in facilitating automated trading of DeFi tokens, and one of the best examples of an automated market maker (AMM). The exchange’s goal is to keep token trading fully automated and completely open to anyone who holds tokens and wishes to trade them.
To learn more about this token visit our Investing in Uniswap guide.
2. PancakeSwap (CAKE)
In the second place, we have PancakeSwap. As the name suggests, this is also a trading, or swapping protocol, and actually, PancakeSwap operates as the largest decentralized exchange on Binance Smart Chain. With BSC being Ethereum’s biggest competitor right now, CAKE is also in direct competition with UNI.
Binance Smart Chain emerged after DeFi started blowing up, and Binance — the world’s largest crypto exchange — decided to become a dominant force in this new sector. Its new blockchain offered all the functionalities and possibilities of Ethereum, only without such high gas fees and an extremely slow network.
As for PancakeSwap itself, it emerged when BSC started seeing the arrival of developers, users, and projects. As project started to launch on the network, there was a need for a Uniswap-like DEX, and PancakeSwap stepped up to take on that role, which it has been doing ever since. PancakeSwap also allows users to win rewards in exchange for providing liquidity, so if you are interested in earning passive income, buying some CAKE and locking it up is sure to bring you rewards.
To learn more about this token visit our Investing in PancakeSwap guide.
3. Aave (AAVE)
Stepping away from the native tokens of DEXes, we have Aave — a DeFi protocol that allows people to lend and borrow money in the form of digital currency. Lending and borrowing has been one of the top activities in the DeFi sector, and for good reason. Unlike in traditional finance, users can actually get a loan with minimum requirements. Anyone who has some spare tokens that they don’t intend to use in the near future can lock up their coins into the lending pool and make them available to the borrowers.
Borrowers can then withdraw the money as soon as they provide collateral, also in the form of cryptocurrencies. Depending on the protocol and the size of the loan, some loans can be taken out even if they are under collateralized, or, in rarer cases, without any collateral at all. But, they are still obligated to return the loan, with interest, and that interest is the lender’s income, granted to them as a reward for helping the community by offering their cryptos.
Aave is one of the leading projects in this part of DeFi, and it has been around since late 2017. It also offers its holders discounts within its platform, and those who hold AAVE tokens also have the right to vote on important decisions that will decide the next steps that the project will take.
To learn more about this token visit our Investing in Aave guide.
4. Maker (MKR)
Nearing the end of the list, we have Maker, which is the governance token of MakerDao and the Maker Protocol. This is a project whose task is to operate DAI — a community-managed decentralized stablecoin that can be minted in exchange for locking up other cryptocurrencies. Meanwhile, MKR tokens provide their holders with the voting power that allows them to vote on various proposals in the MakerDao community.
By holding the token, users can submit their own proposals, or vote on the existing one, and be a part of the decision-making team. It is a pure democracy token that does not pay dividends to its holders, but its value and appreciation do rise with the success and popularity of the DAI stablecoin itself, and as the biggest decentralized stablecoin out there, DAI is quite popular and big already, with the potential to go even higher.
To learn more about this token visit our Investing in Maker guide.
5. yearn.finance (YFI)
Finally, we have yearn.finance, which is an aggregator service for DeFi investors. The project uses automation to allow investors to engage in yield farming and maximize their profits. However, its long-term goal is to simplify the DeFi space for all those investors who are not familiar or comfortable with overly-technical DeFi protocols, and who might be interested in DeFi but are intimidated by the necessity to possess technical knowledge in order to work with it.
Just like the crypto industry, it is believed that DeFi itself needs to be simplified to the point where anyone can figure out how to use it, with no prior experience or technical knowledge, and that is what yearn.finance is focused on. As such, the project has the best chances of leading the DeFi adoption, which is why its token has huge potential to skyrocket and possibly become the most valuable cryptocurrency in the entire industry, in months and years to come.
To learn more about this token visit our Investing in Yearn Finance guide.
Ever since DeFi emerged in mid-2020, the sector has been bursting with activity, with billions upon billions of dollars flowing into it. While it did experience difficulties over the last month or two, alongside the rest of the crypto industry, it will sooner or later go back up to previously seen, and then completely new levels. As a result, this is the best time to get into it, and above, we have listed some tokens that we believe might be the best options for you to watch right now.