The DeFi sector has been around for years, although underdeveloped and it simply wasn’t attracting attention. In 2020, however, it exploded, and while many expected that it will be another passing trend, reaching its peak around October 2020, it continued growing throughout 2021, as well.
Upon proving its worth, it also attracted my attention, particularly when it comes to several specific projects, including:
1) Chainlink (LINK)
Chainlink is one of the largest DeFi protocols that grew as much as it did due to its network of decentralized oracles, which collect off-chain data and translate it so that blockchain products such as smart contracts can use it on-chain. What’s more, the project delivers this data in real-time.
Since 2019, it has started partnering with many different projects, and it currently provides over 75 price feeds to 300 smart contracts and dApps. At the time of writing, the project suits as the 15th-largest cryptocurrency with a market cap of $12.1 billion. Its max and total supply both sit at 1 billion tokens, while its circulating supply at the time of writing sits at 456.5 million LINK.
The tokens are pre-minted, with 35% locked in smart contracts, 41% is in circulation, while 24% is allocated to node operators. LINK does not have a vesting or lock-up schedule, but data from CoinMarketCap indicates that the project sees a 4-5% increase of its circulating supply on an annual basis.
LINK tokens are typically used for staking, network fees, and smart contract usage.
To learn more visit our Investing in Chainlink guide.
2) Uniswap (UNI)
Uniswap is well-known for being the largest Ethereum-based decentralized exchange. It operates as a trading protocol, and it was built to be an on-chain AMM (Automated Market Maker) that can determine crypto prices based on the ratio of two coins within a pool. Uniswap supports a wide variety of DeFi tokens, and ERC-20 tokens, in general.
At the time of writing, it is the 12th largest cryptocurrency, with a market cap of $24.9 billion. Its max and total supply are the same, both sitting at 1 billion UNI, while the circulating supply is above half, currently at 611.6 million UNI.
Similarly to Chainlink, the tokens have been pre-minted, with 60% being distributed among the members of the community, 21.266% granted to team members, 18.04% given to investors, and 0.69% kept for advisors.
UNI has a 4-year vesting period of four years during which 40% will be allocated to the team, investors, employees and advisors, and after that, it will have a perpetual inflation rate of 2%. The token is primarily used for staking, granting staking rewards, and for on-chain governance.
To learn more visit our Investing in Uniswap guide.
3) Maker (MKR)
Next, there is Maker (MKR) — a project that consists of software platform Maker Protokol and MakerDAO. It allows users to lock up ETH coins and in exchange, issue and manage DAI tokens. Its MKR token is primarily used for voting rights, although it can also be staked, used for fees, or as a recapitalization system.
Maker is an old project that was among the first DeFi protocols to be developed. It is also unique as it allows users to directly participate in the DAI governance. At the time of writing, it stands as the 55th largest cryptocurrency, with a market cap of $2.4 billion. Its max supply is 1,005,577, while its total supply is the same as its circulating supply — 991,328 MKR at the time of writing. Given the hard cap of 1.005,577, the project’s token count can never go beyond this level, and its system maintains the balance of price and tokens in circulation through a buyback-and-burn system.
Like with the other two projects that were mentioned, MKR tokens are pre-minted, with 21.35% being used in the governance contract, 8.42% used for MCD Pause Proxy, 55% was granted to liquidity providers, investors, and exchanges, while 15.23% is distributed among other accounts.
To learn more visit our Investing in Uniswap guide.
4) Synthetix (SNX)
In the fourth spot, we have Synthetix, which is one of the fastest-growing DeFi protocols in the sector. It functions as an Etheruem-based decentralized asset insurance protocol, and due to all the issues that the crypto industry has to deal with due to the lack of regulation, it is easy to understand why a protocol like this is in high demand.
Synthetix is used for minting synthetic representations of real-world assets in the form of tokens. The tokens are, of course, pegged to the value of the asset they are based on. It is not unlike stablecoins, in a way.
Synthetix maintains the pegs by using the principle of no-arbitrage, meaning that it allows stakers to burn any additional synths. The project currently occupies the 86th spot on the list of the largest cryptocurrencies by market cap, with its market cap currently sitting at $1.1 billion.
The asset has a total supply of 215,258,834 SNX, and a max supply of 212,424,133 SNX. Currently, the number of tokens in circulation is slightly above 114.8 million. The tokens are primarily used for collateralizing synthetic assets and staking, but they can also be used for governance, yield farming, and paying trading fees.
As mentioned, the tokens are pre-minted, with the total supply being dedicated to a number of purposes. 0.87% were sold in a presale, 19.20% in a private sale, and 3.05% in a public sale. 18.49% was kept by the team, while 0.77% went to advisors. The foundation received 4.62%, 1.93% went to partnership incentives, and 1.16% is to be used in bounties and airdrops. Finally, nearly half of the supply (49.92%) is used for staking.
To learn more visit our Investing in Synthetix guide.
5) PancakeSwap (CAKE)
Lastly, there is PancakeSwap — the biggest decentralized exchange on the Binance Smart Chain. The exchange quickly rose to popularity thanks to the fact that it does not require users to complete the KYC procedure. It is funded by Binance itself, which invested into it in order to support the growing DeFi sector.
PancakeSwap is, essentially, BSC’s version of Uniswap, although it does have some unique features of its own, such as two built-in yield farming tools, lottery tickets, an initial farm offering, an auction market for NFTs, and it strongly focuses on gamification via the use of leaderboards, different tasks, community teams, achievements, and alike.
PancakeSwap is the 39th largest cryptocurrency, with a market cap of $4.2 billion. Its total supply is 228,805,858 CAKE, which is also the amount that is released into circulation. The token doesn’t have a max supply, meaning that there is no limit to how many can be minted.
As for the distribution of the tokens, 38.35% is locked in the main staking contract, while 38.41% is in the wallet used for burning tokens. The remaining 23.24% is allocated to different holders and smart contracts.
Since CAKE has no max supply, the exchange was created with inflation of 750,000 CAKE daily, even with the burning mechanisms included. But, the new tokens go to Syrup Pools (40%) and yield farmers (60%).
CAKE coins are mostly used as rewards and for participation in various features of the exchange’s ecosystem, but also for NFT auctions and crowdpooling.
To learn more visit our Investing in PancakeSwap guide.