Written by: Alan Draper
Compiled by: Blockchain Talk
The financial world remained relatively stable until the emergence of decentralized finance (DeFi), which brought significant changes. DeFi has redefined finance through decentralized lending and ownership, with the potential to change various aspects of daily life.
Today, we will explore leading DeFi platforms like Aave, Lido, Compound, and Uniswap, analyzing their service content, the fundamentals of DeFi, security, and how to choose the DeFi platform that best suits your needs.
Best DeFi Platform Reviews – A deep dive. In this section, we will briefly review each DeFi platform to help you understand their services and advantages. Our goal is to help you better determine whether each platform is suitable for you after understanding its characteristics.
1. Lido Finance – The best DeFi staking platform, connecting over 100 applications
Lido Finance is a decentralized finance platform focused on staking, operated by a mission-driven decentralized autonomous organization (DAO), where all decisions are made through public voting by LDO (the platform's native token) holders.
The platform is known for its high security and cutting-edge technology applications. Lido focuses on Ethereum staking, specifically stETH (the Ethereum version launched by Lido), which is used to pay rewards to users who stake ETH. You can unstake any stETH at any time and exchange it for ETH on a 1:1 basis.
Lido now also allows users to stake MATIC under the same system via stMATIC. Staking ETH or MATIC does not require locking assets, and the entire service is completely non-custodial.
If you wish to hold stETH, please note that Lido has connected to over 100 applications where you can use it for lending, as collateral, and more. Recently, Lido has been expanding its range of services, potentially including other assets beyond ETH staking, 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 the native AAVE token (annual interest rate 4.60%), GHO (annual interest rate 5.30%), and ABPT (annual interest rate 11.70%).
In terms of lending services, Aave supports around 30 cryptocurrencies, including ETH, WBTC, wstETH, USDT, USDC, AAVE, DAI, and LINK.
In addition, Aave is known for its innovation in the DeFi space. Since its launch in 2017, it has achieved significant expansion and has become one of the longest-operating DeFi platforms. Although Aave's total value locked (TVL) is not the highest, its trading volume is the largest across the entire DeFi space.
Aave is completely non-custodial, open-source, and governed by the community. Moreover, borrowers and lenders can independently determine and execute loan terms via smart contracts. By the end of 2024, Aave will launch Aave V3 on the zkSync Era mainnet, enhancing trading efficiency.
If you want to learn more, you can read our Aave user guide.
DeFi Services: Lending, Staking Total Value Locked: $17.38 billion
3. Uniswap – The largest decentralized trading platform and the best DeFi trading platform
Uniswap is currently the largest decentralized trading platform (DEX) on the market and also the top trading platform in the DeFi space, with over 1,500 trading pairs.
More importantly, Uniswap's powerful DeFi platform offers multiple services, including token swapping, earning yield by providing liquidity, and building dApps using the Uniswap protocol. It also integrates with over 300 applications (such as wallets, dApps, and aggregators).
While Uniswap may not be the largest DeFi platform overall, it is unparalleled in the realm of decentralized exchange platforms (DEX). Users can trade on a completely transparent, decentralized platform without any intermediaries, completing trades through smart contracts. Recently, the platform has focused on enhancing liquidity provision and user experience, especially through its V3 model, which allows for the use of concentrated liquidity pools.
For a DEX, learning how to trade on Uniswap is relatively simple, as the site 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, be sure to check out the popular new listings on Uniswap to enhance your portfolio.
DeFi Services: Trading and Lending Total Value Locked: $5.69 billion
4. MakerDAO – A lending platform providing DAI stablecoin
MakerDAO is a large decentralized collateralized debt position platform (CDP platform) based on Ethereum. In other words, it allows users to lend cryptocurrency. Users can initiate a CDP by using ETH or other Ethereum-based assets as collateral.
The main goal of MakerDAO is to ensure that its stablecoin DAI—one of the most popular and widely used stablecoins in the world—maintains its peg to the US dollar.
MKR is the native token of Maker, used to facilitate users' interest payments. Whenever a CDP on the platform is settled, the paid DAI and MKR are burned. The community actively discusses governance changes to improve risk management and collateral strategies.
In addition to its secure and transparent operations, MakerDAO's entry into this list is also due to its close ties with DAI and its long-term stability in the market. It has remained resilient after experiencing all market fluctuations.
DeFi Services: Lending Total Value Locked: $4.93 billion
5. Instadapp – Easy access to DeFi protocols
Instadapp is a decentralized finance application based on Ethereum, designed to provide users with a convenient way to interact with other DeFi protocols.
Its DeFi smart layer allows users to utilize various DeFi platforms in one place. In other words, through Instadapp, you do not need to download multiple standalone apps for staking, lending, or any other activity.
Instadapp offers a comprehensive suite of DeFi tools, including Instadapp Lite and Instadapp Pro, as well as a Web3 Avocado smart wallet and Fluid lending platform. Although it may not sound intuitive, Instadapp Pro is actually completely free.
Despite this, the platform has still been unable to attract a broad DeFi user base, but it is working to improve its user interface and features to simplify multi-protocol interactions. Its lower 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, fully supporting borrowing or lending against collateral. Interest rates are usually very favorable but still affected by supply and demand. Although the scale of this platform may not be as large as Curve or Maker, it provides significant 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 participate in voting.
DeFi Services: Lending Total Value Locked: $2.45 billion
7. Curve Finance – A DEX focused on stablecoin trading
Curve Finance is a decentralized finance platform offering trading, lending, and borrowing services. This DEX has quickly become one of the leaders in the DeFi space, focusing on stablecoin trading, which makes it stand out in the competition. If you are looking for low fees and low slippage, Curve is the ideal choice.
The Curve platform uses automated market makers (AMM) to help maintain the peg of stablecoins. This allows users to trade with almost no impact on prices. Curve maintains market liquidity by automatically buying and selling digital assets and profiting from the bid-ask spread.
The Curve platform currently has total deposits exceeding $1.78 billion, with daily trading volumes typically exceeding $100 million, remaining a leading platform for stablecoin trading with significant TVL. This is no small achievement for a platform that only launched in 2020.
Another unique selling point of this DeFi platform is its prominent website design, which gives a retro vibe while simultaneously featuring advanced Web3 functionalities.
DeFi Services: Lending, Trading
Total Value Locked: $1.84 billion
8. Balancer – A DeFi and DEX platform providing automated portfolio management
Balancer is a suite of automated market maker (AMM) products, a type of decentralized trading platform (DEX) that uses algorithms to facilitate token trading. Unlike trading with other traders, you can handle all trades through AMM.
In addition, Balancer also allows users to earn passive income through the platform's yield pools. Currently, Balancer has over 240,000 liquidity providers. Although this number is not huge, the DeFi platform is still growing rapidly.
Balancer creates and manages various liquidity pools, each consisting of multiple tokens, to achieve portfolio management. Recently, the platform has focused on enhancing its automated market maker (AMM) capabilities and expanding liquidity incentives.
Like other DeFi platforms, Balancer also allows users to buy and hold the 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 – Integrated DEX offering DeFi services including staking
PancakeSwap is one of the most unique DEXs you will encounter, standing out with its distinctive design and vibrant colors. But don't let its quirky appearance distract you; it remains one of the leading multi-chain decentralized trading platforms in the world.
PancakeSwap is an integrated DEX that offers services including trading, staking, yield farming, and even a game marketplace launched at the end of 2023.
PancakeSwap's popularity can be attributed to its operation on the BNB chain, which allows for quick confirmation times and lower user fees.
Earning potential is rich and diverse; you can trade, stake the platform's native TokenCAKE for an annual yield of up to 25.63%, join liquidity pools and farming pools, and explore more options, including gaming options through game marketplaces and NFTs.
Although PancakeSwap has not been around for long, it has already established a dominant position in the DEX market on BSC. Additionally, 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 – A yield farming platform with automated strategies
Yearn Finance is a suite of products 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 returns.
By utilizing the numerous options provided by Yearn, you can maximize interest rates. Additionally, you can participate in platform development and network governance by holding the native TokenYFI.
The protocol can automatically adjust your assets and transfer them among various high-yield options to provide you with the best asset returns. In other words, you don’t need to do much with the portfolio, as the platform handles most of the transactions. Moreover, the development team is working to create new vaults and strategies to optimize user yield generation.
DeFi Services: Yield Aggregator
Total Value Locked: $221.97 million
What are DeFi platforms?
DeFi platforms utilize blockchain technology and cryptocurrencies to provide financial services. This definition, while broad, is comprehensive, effectively covering all aspects of decentralized finance.
DeFi platforms are typically decentralized cryptocurrency trading platforms, liquidity provision platforms, lending platforms, yield farming applications, prediction markets, or NFT marketplaces.
A premise of DeFi platforms is peer-to-peer financial transactions. They are typically designed to provide:
Broader popularity
High interest rates
Low fees
Strong security
Close to or completely transparent
Autonomy completely detached from centralized institutions
Despite many advantages, DeFi is not without its drawbacks. The DeFi ecosystem remains unregulated, leading to the entry of some bad actors into the market. At the same time, programming vulnerabilities in DeFi applications can easily lead to hacks and scams.
DeFi platforms have emerged not long ago, but their popularity has been steadily increasing. In recent years, the number of DeFi users has grown steadily. Research by Statista indicates that by 2028, the market is expected to have around 22.09 million users, a huge leap compared to 7.5 million users at the end of 2021.
Types of DeFi Platforms
As mentioned, there are many different forms of DeFi platforms. Below, we will explain the most common types we recommend.
1) Decentralized Exchange Platforms (DEXs)
Decentralized exchange platforms are a peer-to-peer cryptocurrency trading market. Unlike centralized exchanges, which act as intermediaries, DEXs are only used to facilitate exchanges between traders, with traders conducting trades independently and freely determining the terms of trade. The entire process is usually completed through smart contracts.
DEX facilitates cryptocurrency trading, so there are no fiat purchase options like centralized exchanges, nor can crypto assets be exchanged for cash. To use a DEX, you need to have a cryptocurrency wallet containing digital assets.
2) Lending platforms
As the name suggests, these platforms allow users to lend cryptocurrencies. Those wanting to lend cryptocurrency can deposit assets into the platform to earn interest by letting others borrow. Borrowers are required to provide collateral and pay interest to borrow cryptocurrency.
To some extent, this system is similar to banks, but it is a completely decentralized peer-to-peer model. Moreover, the platform is unregulated, and everything is handled by smart contracts, ensuring security and transparency.
3) Liquidity mining platforms
These types of platforms allow cryptocurrency holders to profit from liquidity mining from holding digital assets. They enable users to lend crypto assets to various decentralized applications (dApps) to provide liquidity and earn corresponding yields. These yields are often presented in the form of annual percentage yield (APR) based on borrowers' interest rates.
Liquidity mining is key to the realization of decentralized finance (DeFi). Unlike staking, liquidity mining rewards are earned by lending assets rather than participating in network governance. Many decentralized exchange platforms (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, rather than the platforms themselves. Stablecoins play an important role in DeFi as they are widely used in decentralized exchange platforms (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 such as options, swaps, and futures. Therefore, investors can benefit from asset exposure, configurable risks, and cash flow patterns from these products.
5) Asset management platforms
The DeFi space is becoming increasingly diverse, and traditional Web3 wallets can no longer effectively track various digital assets, whether they are tokens, coins, NFTs, or DeFi positions. This is where DeFi asset management platforms like Yearn Finance, Zerion, and Zapper come into play.
These platforms are multi-chain compatible and can detect DeFi positions, not just assets in cryptocurrency wallets, and most features are automated. By using these platforms, you can track all assets and positions through a single dashboard.
6) How to choose a DeFi platform – Our criteria
Choosing the right DeFi platform, whether it's 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 on the DeFi platform (for example, how much you want to earn through the platform). Then, assess whether the platform can meet those goals. In this regard, you should check the platform's annual percentage yield (APYs).
Assess security measures. Due to the lack of regulation in the DeFi space, it is crucial to check the security measures offered by the platform. If the platform's security measures do not meet current standards, you may face potential risks of cyber attacks. Check whether the platform offers security measures such as multi-signature wallets, end-to-end encryption, and regular audits.
Check platform reputation. Besides security, it is also important to check the platform's reputation. If the platform itself is not trustworthy, security measures are of no use. The DeFi space is rife with scams due to lack of regulation, so it is critical to choose a verified, secure, and trustworthy platform.
Explore the features and characteristics of the platform. After ensuring the platform's security, you should focus on the most important aspects—the platform's functionality. If you are looking for yield farming, the platform should offer diverse liquidity pools. If you want to earn through staking, the platform should provide good APY and a variety of token options. Additionally, the platform needs to be interoperable with other DeFi protocols, as you may wish to use other decentralized applications (dApps) and DeFi platforms.
7) Are DeFi platforms safe for beginners?
If you are using a reputable platform with excellent security measures, then DeFi is safe for both beginners and advanced users.
However, beginners need to understand what they are getting into and how DeFi services operate. The DeFi space can be very risky for new investors, mainly due to the volatility of cryptocurrencies and the associated products that carry high uncertainty.
Options in DeFi such as staking and lending can be very profitable. However, if you make some wrong decisions or purchase underperforming tokens, entering failed projects, you may also lose all your investments.
Most importantly, throughout the process, you must always maintain control over your private keys. Finally, avoid letting public opinion influence 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, focusing on innovative and fully transparent financial services, operating through smart contracts; while CeFi, on the other hand, relies on traditional intermediaries, with platforms adhering to all regulations in this field and placing great emphasis on user experience.
To better understand the differences between the two and decide which financial platform is better, let’s look at the pros and cons of each type of platform:
Conclusion
The DeFi space is vibrant and continuously evolving, which is why you will encounter a variety of platforms offering one or more DeFi products.
Given the vast market, finding the platform that best suits your needs can be challenging. However, following the steps in this guide and referring to our suggestions should make the entire search process easier.
