Best DeFi Platforms
The main objective of DeFi platforms is to decentralize the investment and trading process. One of the central attractions here is that these solutions offer higher transparency compared to traditional financial institutions.
The best DeFi platforms of today are powered by dApps or decentralized protocols — built on either Bitcoin or Ethereum. There are new projects entering the market on almost a monthly basis, providing new financial opportunities for investors and traders of all shapes and sizes.
Here are some of the ways that dApps and decentralized protocols are being used today:
- Borrowing and Lending: DeFi platforms allow you to take out a loan on your crypto assets, without you having to complete a KYC process, have your credit checked, or even be in possession of a bank account. You can also lend your cryptocurrency holdings in return for interest, contributing to the liquidity of the DeFi platform in question.
- Digital Wallets: Non-custodial DeFi crypto wallets permit you to have full control over your assets and private keys in a secure environment.
- Decentralized Exchanges: The best DeFi platforms enable you to eliminate the need for a middleman and instead engage in trading through smart contracts.
- Asset Management Protocols: DeFi supports frameworks that allow users to pool funds for investment products such as automated investments and asset aggregators.
- Non-Collateral Loans: DeFi has made it easier for you to receive unsecured loans on a peer-to-peer basis.
- Non-Fungible Tokens: The best DeFi platforms are increasingly offering support for NFTs. These are tokens that allow you to commodify an asset that was previously non-commodifiable on the blockchain. This might include original artwork, song, or even a Tweet!
- Yield Farming: This DeFi product enables you to earn interest on your crypto assets by staking them on a DeFi platform.
As you can see, the scope of the DeFi industry is quite diverse. Y0u can get clear, borderless access to almost any financial service imaginable — from savings accounts, loans, trading, insurance, and more.
So where can you find the best DeFi platforms that will give you access to the most promising features of this sector? Below, we have reviewed a selection of top-rated platforms and how you can benefit from them.
Launched in 2018, YouHodler is one of the best multi-faceted crypto lending platforms in the market. It is primarily a crypto-fiat financial service that provides you with high-yield returns on your deposits. The DeFi platform has partnered with reputable banks in Europe and Switzerland to ensure the safe and secure storage of your digital assets.
YouHodler also comes integrated with a trading exchange that offers support for many prominent DeFi coins — including Compound, DAI, Uniswap, Chainlink, Maker, and more. One of the most notable features of YouHodler is that it allows you to deposit Bitcoin, or other cryptocurrencies — in order to start earning interest on the asset right away.
Each lending and borrowing deal on this platform is a legally binding document that follows the guidelines of the European Union. You can earn up to 12.7% on your crypto deposits and any returns you make will be directly deposited into your YouHodler wallet every week. Apart from this, you can also gain access to crypto loans on the platform. YouHodler offers an impressive Loan-to-Value ratio of 90% for the top 20 cryptocurrencies supported.
You can also get loans in fiat currencies such as US dollars, euros, Swiss francs, and British pounds. The loans can be instantly withdrawn to your individual bank account or to a credit card. For those who are more experienced with the DeFi crypto market, YouHodler has also introduced two other products — MultiHODL and Turbocharge. With these features, the platform will auto-invest your assets into multiple loans in order to get you maximum returns.
However, considering the risk involved, these functionalities are best reserved for seasoned investors who are familiar with the ins and outs of the financial markets. On the other hand, if you are only looking to earn passive income from your crypto assets, then YouHodler can get you super-high returns while allowing you to store your assets in a secure space.
Nexo is another prominent name in the crypto space. The platform has introduced several financial products that can replace traditional banking with crypto assets. Nexo allows you to earn interest on 18 different crypto assets — including DeFi coins such as DAI and Nexo token. You can receive up to 8% returns on cryptocurrencies, and up to 12% on stablecoins.
Your earnings will be paid out to you on a daily basis. In addition, you can also deposit fiat currencies such as euros, US dollars, and British pounds to yield returns on them. Apart from a crypto savings account, Nexo also allows you to receive instant loans by collateralizing your digital assets.
The process is entirely automated — and you can get your loan request processed without having to go through any credit checks. The interest rates for Nexo crypto loans begin at 5.90% APR. The minimum loan amount is set at $50, and you can get credit lines up to $2 million. Nexo also has established its own native cryptocurrency exchange, where you can buy and sell over 100 cryptocurrency pairs.
The platform has devised a Nexo Smart System to ensure that you get the best price in the market by connecting to different exchanges. Moreover, Nexo also promises that there will be minimal price fluctuations when you place a market order. Similar to other DeFi platforms, Nexo has also launched its own governance coin — the NEXO token.
Holding the NEXO token entitles you to several rewards on the platform — such as higher returns on your deposits, and lower interest rates on loans. More importantly, Nexo is one of the few platforms that pays dividends to its token holders. In fact, 30% of the net profits of this DeFi coin are distributed among NEXO token holders — depending on the size and duration of the investment.
Uniswap is undeniably one of the most popular DeFi platforms in the wider cryptocurrency market. The platform allows you to trade any Ethereum-based ERC-20 token using private wallets such as Metamask. In 2020, Uniswap supported 58 billion dollars of trading volume — making it the largest decentralized exchange in the crypto world. These numbers are up by 15,000% from 2019 — indicating how far the DeFi platform has come in just over a year.
One of the main advantages of Uniswap is that there is no need for you to deposit your assets into the platform. In other words, this is a non-custodial application that uses liquidity pools instead of order books. There is no need for you to sign up on the Uniswap protocol nor complete a KYC process.
You can swap between any ERC20 token or earn a small percentage of the collected fees simply by adding to the liquidity pool. As we briefly noted earlier, Uniswap also has its own UNI token — which can provide you with voting shares in the provider’s protocol governance. The DeFi coin has recently soared in price, attracting more attention to UNI protocol.
Recently, Uniswap also introduced its latest version of its exchange — named Uniswap V3. It comes with concentrated liquidity and fee tiers. This allows liquidity providers to be remunerated according to the level of risk they take. Such features make Uniswap V3 one of the most flexible AMMs designed.
The Uniswap protocol also aims to provide low-slippage trade execution that can surpass that of centralized exchanges. These new updates might drive the price of the UNI DeFi token further upwards. As you can see, the DeFi platform is continuously evolving and might soon add other products such as crypto loans and lending to its decentralized ecosystem.
Launched in 2018, BlockFi has evolved to become the go-to place to grow your digital assets. Over the years, the DeFi platform has managed to receive over $150 million from notable community figures, and gain a loyal customer following. BlockFi provides a variety of financial products targeted at both individual and institutional cryptocurrency traders. BlockFi Interest Accounts, BIAS for short — allows you to earn an interest rate of up to 8.6% annually on cryptocurrencies.
As with the other DeFi platforms. BlockFi lends these user deposits to other individuals and institutional brokers and charges an interest on them — which is, in turn, pay to its users. That said, it is important to note that user deposits are given more priority compared to company equity when it comes to lending.
BlockFi also allows users to use their digital assets as collateral, and borrow up to 50% of the collateral value in US dollars. As you can see, this is significantly less than the LTV offered by other platforms such as YouHodler. On the other hand, the loans are processed almost instantaneously. Finally, another advantage of BlockFi is that it offers a no-free for the exchanges on its platform.
However, the exchange rates are less optimal compared to what you might receive on other platforms. Overall, BlockFi holds its position as one of the leading alternative financial services — enabling you to use your digital assets to earn passive income, as well as secure quick loans against it.
Originally launched as ETHLend, Aave started out as a marketplace where crypto lenders and borrowers can negotiate their terms without having to go through a third party. Since then, the DeFi platform has grown into an established DeFi protocol that offers a number of financial products. Aave’s liquidity pools currently offer support for over 25 crypto, stable, and DeFi coins.
This includes DAI, Chainlink, yearn.finance, Uniswap, SNX, Maker, and more. In addition, Aave has also released its own governance token — AAVE. This enables token holders to contribute to the governance of the Aave protocol. The AAVE token can also be staked on the platform to earn interest as well as other rewards.
Aave primarily serves as s crypto-lending platform. You can borrow and lend digital assets on Aave in a decentralized manner, without having to submit any AML or KYC documentation. As a lender, you will be effectively depositing your assets in a liquidity pool. A portion of the pool will be set aside as a reserve against the volatility within the DeFi platform. This also makes it easier for users to withdraw their funds without affecting liquidity.
Moreover, you will be able to receive interest on the liquidity you are providing to the platform. If you want to take out a loan, Aave allows you to borrow by overcollateralizing your assets. The LTV of the loan you receive typically ranges from 50 to 75%.
However, apart from this, Aave also distinguishes itself by offering other unique products — such as unsecured crypto loans and rate switching. We will discuss this more in detail in the ‘Crypto Loans at DeFi Platforms’ section of this guide. Nevertheless, such unique collateral types have allowed Aave to gain traction in the DeFi sector. In fact, compared to other DeFi protocols in this space, Aave offers a unique arsenal of features.
Celsius is another blockchain-based platform that has developed its own native token. The CEL token is the backbone of the Celsius ecosystem. This ERC-20 token can be used within the Celsius protocol to maximize your benefits from its financial products.
In terms of utility, Celsius allows you to earn interest on your crypto assets, with an interest rate as high as 17.78%. This is well above the industry average — however, you will need to hold CEL tokens to receive returns this high. Celsius also allows you to use cryptocurrency as collateral to borrow fiat currency or other digital assets.
Once again, the interest rate here is incredibly competitive — set only at 1% APR. This is on the proviso that you have sufficient CEL tokens staked on the platform. In simple terms, the benefits you receive on the platform are heavily reliant on the amount of CEL you hold. As such, if you are interested in using Celsius, it would be a good idea to add CEL to your cryptocurrency portfolio.
After all, those that hold and stake CEL tokens can get the highest returns on their deposits, as well as the lowered interest rates on loans. In terms of capital gains, the CEL token has increased by 20% in value since the beginning of 2021. However, it is important to note that the utility of the CEL token is limited outside of the Celsius ecosystem.
Compound Finance can easily be considered as one the largest lending protocols in the DeFi sector. As with the majority of other DeFi platforms discussed today, the Compound protocol is built on the Ethereum blockchain. Although it was initially centralized, with the launch of its governance token, Compound is taking its first few steps towards becoming a community-driven decentralized organization.
At the time of writing, Compound supports 12 crypto and stable coins — which also includes a number of prominent DeFi tokens. The crypto lending facility on Compound works similarly to other DeFi platforms. As a lender, you can earn interest on your funds by adding liquidity to the platform. While as a borrower — you can gain instant access to loans by paying interest.
However, the entire princess is facilitated through a new product called a cToken contract. These are EIP-20 representations of the underlying assets — that track the value of the asset you have deposited or withdrawn. Any transaction of the Compound protocol happens through cToken contracts. You can use them to earn interest, and as collateral to get loans. You can either ‘mint’ to get your hands on cTokens or borrow them via the Compound protocol.
Compound also employs a complex algorithm that defines the interest rates on the platform. As such, unlike other DeFi platforms, the interest rate is variable — depending on the supply and demand within the protocol. Through its governance token COMP — Compound plans to achieve complete decentralization. This will be done by providing voting rights and offering incentives for COMP holders on its DeFi platform.
MakerDAO is one of the first DeFi platforms to have caught the eye of crypto investors. The project was launched in 2017 and serves as a decentralized digital vault system. You can deposit a number of Ethereum-based cryptocurrencies and use them to mint the platform’s native token — DAI. As we mentioned earlier, the value of DAI mirrors that of the US dollar. The DAI you generate on MakerDAO can be utilized as collateral in order to take out loans.
However, remember that exchanging your ERC-20 token in return for DAI is not free on the platform. You will be charged a maker fee when you are opening a vault. This fee can wary from time to time and will be automatically updated on the platform. For this reason, if you are using Maker Vaults, it is best to keep your collateralization rate as high as possible — in order to avoid liquidation.
Outside the MakerDAO ecosystem, DAI functions as any other DeFi coin. You can lend it, or use it to earn passive income. In recent times, DAI has since increased its functionalities to include NFT purchases, integration into gaming platforms, and eCommerce businesses. Apart from DAI, MakerDAO has an additional governance currency — Maker. As with other DeFi coins, holding Maker will get you access to voting rights and lower fees on the platform.
Important to Know
The platforms discussed above offer a glimpse into the expansive DeFi network being built today. As it goes, the future of the DeFi sector will be determined by the community behind it. If the industry continues to attract more attention, it should be reflected in the price of the respective DeFi coin.
As you can see, the world of DeFi has revolutionized the financial sector. These top DeFi platforms aim to transform the industry by leveraging Blockchain technology. In turn, you will get access to transparency and better control over your assets.
If you believe that DeFi has a huge potential to dominate in the future, one of the best moves to make would be to invest in a DeFi coin. For those who are new to the cryptocurrency space, you will benefit from a bit of guidance in this area. Therefore, we have put together a guide on how to buy the best DeFi coins in the section below.