By Alan Draper
Compiled by: Vernacular Blockchain
The financial world remained relatively stable until the advent of decentralized finance (DeFi), which brought about significant changes. DeFi has already redefined finance by decentralizing lending and ownership, and has the potential to transform every aspect of daily life.
Today, we will explore leading DeFi platforms such as Aave, Lido, Compound, and Uniswap, analyzing what they offer, the fundamentals of DeFi, security, and how to choose the DeFi platform that best suits your needs.
Best DeFi Platforms Review - A Deep Dive. In this section, we will briefly review each DeFi platform to help you understand their services and benefits. Our goal is to enable you to better judge whether it is right for you after understanding the characteristics of each platform.
1. Lido Finance – The best DeFi staking platform, connecting more than 100 applications
Lido Finance is a decentralized financial platform focused on staking, operated by a mission-driven decentralized autonomous organization (DAO), and all decisions are made by LDO (the platform's native token) holders through public voting.
The platform is known for its high security and use of cutting-edge technology. Lido focuses on Ethereum staking, specifically stETH (Lido's version of Ethereum), which is used to pay rewards to users who stake ETH. You can unstake any stETH at any time and redeem it for ETH at a 1:1 ratio.
Lido also now allows users to stake MATIC under the same system through stMATIC. Staking of ETH or MATIC does not require locked assets, and the entire service is completely non-custodial.
If you want to hold stETH, please note that Lido connects more than 100 applications, and you can use it for borrowing, as collateral, and more. Recently, Lido is expanding its service range, in addition to ETH staking, it may also include other assets, further enriching its staking ecosystem to attract more users.
DeFi Services: Staking Total value locked: $30.82 billion
2. Aave – The best DeFi lending platform with one of the longest operating records
Aave is one of the leaders in the DeFi space, providing cryptocurrency lending services. It also allows you to earn passive income by staking AAVE native tokens (4.60% annual interest rate), GHO (5.30% annual interest rate), and ABPT (11.70% annual interest rate).
In terms of lending services, Aave supports about 30 cryptocurrencies, including ETH, WBTC, wstETH, USDT, USDC, AAVE, DAI and LINK.
Additionally, Aave is known for its innovativeness in the DeFi space. Since its launch in 2017, it has scaled significantly, becoming one of the longest-running DeFi platforms. Although Aave’s total value locked (TVL) is not the highest, its trading volume is the largest in the entire DeFi field.
Aave is completely non-custodial, open source, and community-governed. In addition, borrowers and lenders can decide and execute loan terms through smart contracts. At the end of 2024, Aave launched Aave V3 on the zkSync Era mainnet, improving transaction efficiency.
If you want to learn more, you can read our guide on using Aave.
DeFi services: lending, staking Total value locked: $17.38 billion
3. Uniswap – The largest decentralized exchange and the best DeFi exchange
Uniswap is currently the largest decentralized exchange (DEX) on the market and a top trading platform in the DeFi space, with more than 1,500 trading pairs.
More importantly, Uniswap’s powerful DeFi platform provides multiple services, including token swaps, earning income by providing liquidity, and building dApps using the Uniswap protocol. It is also integrated with more than 300 applications such as wallets, dApps, and aggregators.
While Uniswap may not be the largest DeFi platform overall, it is unrivaled in the world of decentralized exchanges (DEX). Users can trade on a fully transparent, decentralized platform without any intermediaries, and complete transactions through smart contracts. Recently, the platform has focused on improving liquidity provision and user experience, especially through its V3 model, which allows the use of centralized liquidity pools.
For a DEX, learning how to trade on Uniswap is relatively simple as the website has a user-friendly and clean design. Uniswap is known for constantly introducing new tokens, so if you are interested in trading the latest cryptocurrencies, you may want to check out the popular new listings on Uniswap to add to your portfolio.
DeFi services: trading and lending Total value locked: $5.69 billion
4. MakerDAO – a lending platform that provides DAI stablecoins
MakerDAO is a large decentralized collateralized debt position platform (CDP platform) based on Ethereum. In other words, it allows users to borrow cryptocurrencies. Users can open a CDP by using ETH or other Ethereum-based assets as collateral.
MakerDAO’s main goal is to ensure that its stablecoin DAI — one of the most popular and widely used stablecoins in the world — can maintain its peg to the U.S. dollar.
MKR is Maker's native token, used to facilitate interest payments to users. Whenever a CDP on the platform is settled, the DAI and MKR paid are destroyed. The community actively discusses governance changes to improve risk management and collateral strategies.
Besides its secure and transparent operations, MakerDAO made it to this list because of its close connection with DAI and its long-term stability in the market. It has remained standing despite all the market fluctuations.
DeFi services: Lending Total value locked: $4.93 billion
5. Instadapp – Easy access to DeFi protocols
Instadapp is an Ethereum-based decentralized financial application that aims to provide users with a convenient way to interact with other DeFi protocols.
Its DeFi smart layer enables users to use various DeFi platforms in one place. In other words, with Instadapp, you don’t need to download multiple separate apps for staking, borrowing, or any other activity.
Instadapp offers a comprehensive set of DeFi tools, including Instadapp Lite and Instadapp Pro, in addition to the Web3 Avocado smart wallet and Fluid lending platform. Although it may not sound intuitive, Instadapp Pro is actually completely free.
Still, the platform has failed to attract a broad base of DeFi users, but it is working to improve its user interface and features to simplify multi-protocol interactions. Its low popularity may be the reason for its low TVL.
DeFi services: lending, staking Total value locked: $2.85 billion
6. Compound – A lending platform with strong stablecoin support
Compound.finance is a decentralized cryptocurrency lending market. According to the latest data, it covers 16 markets, including cryptocurrencies such as ETH, USDT, USDC, OP, and MATIC.
With the addition of USDT and USDC, the platform clearly has excellent support for lending stablecoins.
Compound is based on Ethereum and fully supports borrowing or lending against collateral. Interest rates are generally very favorable, but are still subject to supply and demand. While the platform may not be as large as Curve or Maker, it provides considerable value to most crypto users.
Compound has a native token (COMP) that users can hold and participate in the governance of the decentralized protocol. Change proposals are published on the Compound website and users can vote.
DeFi service: Lending Total value locked: $2.45 billion
7. Curve Finance – DEX focusing on stablecoin trading
Curve Finance is a decentralized finance platform that provides trading, borrowing, and lending services. The DEX has quickly become one of the leaders in the DeFi space, with a focus on stablecoin trading, which makes it stand out from the competition. If you are looking for low fees and low slippage trading, Curve is the ideal choice.
The Curve platform uses automated market makers (AMMs) to help maintain the peg of stablecoins. This allows users to trade with little to no impact on prices. Curve maintains market liquidity by automatically buying and selling digital assets and profiting from the bid-ask spread.
With total deposits currently exceeding $1.78 billion and daily trading volume often exceeding $100 million, the Curve platform remains the leading platform for stablecoin trading with significant TVL. For a platform that only launched in 2020, this is no small achievement.
Another unique selling point of this DeFi platform is its outstanding website design, which gives it the feel of an old-school website but at the same time comes with advanced Web3 functionalities.
DeFi services: lending, trading
Total value locked: $1.84 billion
8. Balancer – DeFi and DEX platform that provides automated portfolio management
Balancer is an automated market maker (AMM) product suite, a type of decentralized exchange (DEX) that uses algorithms to facilitate token trading. Unlike other traders, you can handle all your trades through AMM.
In addition, Balancer also allows users to earn passive income through the platform's yield pool. Currently, Balancer has more than 240,000 liquidity providers. Although this number is not huge, the DeFi platform is still developing rapidly.
Balancer creates and manages various liquidity pools, each of which consists of multiple tokens, to enable portfolio management. Recently, the platform has focused on improving its automated market maker (AMM) capabilities and expanding liquidity incentives.
Similar to other DeFi platforms, Balancer also allows users to purchase and hold native TokenBAL to participate in the governance of the protocol.
DeFi services: automated portfolio management, trading, yield farming
Total value locked: $890.51 million
9. PancakeSwap – All-in-one DEX, providing DeFi services including staking
PancakeSwap is one of the most unique DEXs you’ll come across, standing out with its unique design and bright colors. But don’t let its weird appearance distract you, it’s still one of the world’s leading multi-chain decentralized trading platforms.
PancakeSwap is an all-in-one DEX that provides services including trading, staking, yield farming, and even a game market (Game Marketplace) to be launched at the end of 2023.
PancakeSwap’s popularity is attributed to its operation on the BNB chain, which results in fast confirmation times and low fees for users.
The earning potential is rich and varied, you can trade, stake the platform’s native TokenCAKE with an annualized yield of up to 25.63%, join liquidity pools and farming pools, and more, including gaming options through the game marketplace and NFTs.
Although PancakeSwap has only been on the market for a short time, it has already dominated the DEX market on BSC. In addition, due to its connection with the BNB chain, it is particularly ideal for BN users.
DeFi services: trading, yield farming, staking
Total value locked: $876.21 million
10. Yearn Finance – Yield farming platform with automated strategies
Yearn Finance is a product suite focused on helping individuals and decentralized autonomous organizations (DAOs) earn yield from digital assets. The services provided by this yield aggregator are designed to simplify yield farming and help you optimize your returns.
By taking advantage of the many options Yearn offers, you can maximize your interest rate. In addition, you can also participate in the development of the platform and network governance by holding the native Token YFI.
The protocol can automatically adjust your assets and transfer them between various high-yield options to provide you with the best return on your assets. In other words, you don’t need to do much with your portfolio because the platform will handle most of the transactions. In addition, the development team is working hard to create new vaults and strategies to optimize users’ yield generation.
DeFi Services: Yield Aggregator
Total value locked: $221.97 million
What is a DeFi platform?
DeFi platforms use blockchain technology and cryptocurrencies to provide financial services. Although this definition is broad, DeFi itself is comprehensive and effectively covers all aspects of decentralized finance.
DeFi platforms are typically decentralized cryptocurrency exchanges, liquidity providers, lending platforms, yield farming applications, prediction markets, or NFT markets.
One of the premises of DeFi platforms is peer-to-peer financial transactions. They generally aim to provide:
Wider popularity
High interest rates
Low Fees
Strong security
Nearly or completely transparent
Complete autonomy from centralized institutions
Although DeFi has many advantages, it is not without disadvantages. The DeFi ecosystem is not yet regulated, which has led to some bad actors entering the market. At the same time, programming vulnerabilities in DeFi applications are prone to hacking and scams.
DeFi platforms have not been around for long, but their popularity has been increasing. The number of DeFi users has grown steadily in recent years. According to research data from Statista, the market is expected to have approximately 22.09 million users by 2028, which would be a huge leap from 7.5 million users at the end of 2021.
Types of DeFi Platforms
As mentioned above, DeFi platforms come in many different forms. Below we explain the most common types we recommend.
1) Decentralized Exchanges (DEXs)
A decentralized exchange is a peer-to-peer cryptocurrency trading market. Unlike centralized exchanges, which act as intermediaries themselves, DEXs are only used to facilitate exchanges between traders, who trade independently and can freely determine the terms of the trade. The entire process is usually completed through smart contracts.
DEX facilitates cryptocurrency trading, so there is no fiat currency purchase option like centralized exchanges, nor can you exchange crypto assets for cash. To use a DEX, you need to have a crypto wallet that contains digital assets.
2) Lending platform
As the name suggests, these platforms allow users to borrow cryptocurrencies. People who want to lend cryptocurrencies can deposit their assets on the platform and earn interest by letting others borrow them. Borrowers need to provide collateral and pay a certain interest to borrow cryptocurrencies.
In a way, this system is similar to a bank, but it is a completely decentralized peer-to-peer model. Moreover, there is no supervision on the platform, and everything is handled by smart contracts, which ensures security and transparency.
3) Liquidity Mining Platform
These platforms enable cryptocurrency holders to profit from holding digital assets through liquidity mining. They allow users to lend crypto assets to various decentralized applications (dApps) to provide liquidity and receive corresponding returns. These returns are usually presented in the form of an annualized percentage return (APR), which is based on the interest rate of the borrower.
Liquidity mining is the key to decentralized finance (DeFi). Unlike staking, liquidity mining is about getting rewards by lending assets, rather than participating in network governance. Many decentralized exchanges (DEX) offer liquidity mining services, but there are also dedicated liquidity aggregation platforms.
4) Stablecoins and synthetic assets
Stablecoins and synthetic assets are services of decentralized finance (DeFi) platforms, not the platforms themselves. Stablecoins play an important role in DeFi because they are widely used in decentralized exchanges (DEX), lending platforms, and liquidity mining platforms. In this guide, you have learned about MakerDAO, a platform focused on stablecoin trading.
Synthetic assets are crypto derivatives whose value is derived from the value of other assets. Top DeFi platforms offer synthetic products like options, swaps, and futures. Therefore, investors can get the benefits of asset exposure, configurable risk, and cash flow patterns from these products.
5) Asset Management Platform
The DeFi field is becoming more and more diverse, and traditional Web3 wallets can no longer effectively track various digital assets, whether it is tokens, currencies, NFTs or DeFi positions. At this time, DeFi asset management platforms such as Yearn Finance, Zerion and Zapper come in handy.
These platforms have multi-chain compatibility, are able to detect DeFi positions, not just assets in crypto wallets, and most functions are automated. With these platforms, you can track all your assets and positions through a single dashboard.
6) How to choose a DeFi platform - our criteria
Choosing the right DeFi platform, whether it is a DeFi staking platform or another type of platform, requires careful consideration of some important criteria. Let’s take a look at these criteria.
Clarify your goals First, determine your goals for the DeFi platform (e.g., the amount of money you hope to earn through the platform). Then, evaluate whether the platform can meet these goals. In this regard, you should check the platform's annualized percentage yields (APYs).
Assess security measures Due to the lack of regulation in the DeFi space, it is important to check the security measures provided by the platform. If the platform's security measures are not up to current standards, you may be at risk of potential cyber attacks. Check if the platform provides security measures such as multi-signature wallets, end-to-end encryption, and regular audits.
Check the reputation of the platform In addition to security, it is also necessary to check the reputation of the platform. Security measures will not help if the platform itself is not trustworthy. The DeFi field is rife with scams due to the lack of regulation, so it is important to choose a proven, safe and trustworthy platform.
Explore the platform’s features and functions After ensuring the platform is secure, you should focus on the most important thing - the platform’s functions. If you are into yield farming, the platform should provide a diverse liquidity pool. If you want to earn money through staking, the platform should provide a good APY and a diverse selection of tokens. In addition, the platform needs to be able to interoperate with other DeFi protocols, as you may want to use other decentralized applications (dApps) and DeFi platforms.
7) Are DeFi platforms safe for beginners?
DeFi is safe for beginners and advanced users alike if you’re using a reputable platform with excellent security measures.
However, beginners need to understand what they are participating in and how DeFi services work. The DeFi field can be very risky for novice investors, mainly because cryptocurrencies are highly volatile and related products are therefore highly uncertain.
DeFi options like staking and lending can be very profitable. However, if you make some wrong decisions or buy underperforming tokens and enter failed projects, you may lose all your investment.
Most importantly, you must maintain control of your private keys throughout the process. Finally, don’t let the opinions of the crowd sway your decisions.
8) DeFi vs. CeFi Platforms: Which is Better?
As you might guess, decentralized finance (DeFi) and centralized finance (CeFi) are two opposing concepts. DeFi relies on decentralized networks, focuses on innovative and fully transparent financial services, and operates using smart contracts; while CeFi relies on traditional intermediaries, and the platform follows all regulations in this field and pays great attention to user experience.
To better understand the difference between the two and decide which financial platform is better, let’s look at the pros and cons of each:
in conclusion
The DeFi space is vibrant and continues to evolve, which is why you’ll come across a wide variety of platforms that offer one or more DeFi products.
Given the sheer size of the market, it can be challenging to find the platform that best suits your needs. However, by following this guide and using our recommendations, the search should become much easier.