5 Best DeFi Cryptocurrencies to Watch in 2020
DeFi cryptocurrencies , short from decentralized finance cryptocurrencies, is a new asset class backed by blockchain technology. DeFi cryptocurrencies allow entrepreneurs to redefine traditional financial instruments through the use of decentralized architecture, where no government or company has control. Although Ethereum and Bitcoin can be defined as the original DeFi, a new asset class categorized as DeFi crypto has emerged to bring new players to the table. What are some of the top DeFi cryptos and why you should consider owning some of the best DeFi cryptos?
MakerDAO was launched in 2015 on the Ethereum blockchain and has since become one of the most popular DeFi cryptocurrency, as well as representing one of the most successful projects on the Ethereum network. MakerDAO is defined as a lending facility with decentralized governance. The facility uses Ethereum smart contracts in an automated way to facilitate lending services and enable efficient operations for all users interested in MakerDAO services. The native cryptocurrency of MakerDAO is a stablecoin called Dai. Dai is pegged to the value of the US dollar, thus representing a favourable way of lending funds. Users can lend from the MakerDAO system by posting collateral in the form of ETH.
In exchange, users get Dai tokens with a stable value of the US dollar. MKR tokens support the governance of the network, while also serving the purpose of paying interest on the borrowed Dai units. The governance of MakerDAO is unique, which is why MakerDAO is so popular in the first place. No central authorities control the network as the system is based on automated Ethereum smart contracts. Each Dai token is backed by ETH contained within a MakerDAO lending contract. These contracts are known as CDPs – Collateralized Debt Positions. The system achieves stability by combining the underlying assets, external factors and automation, which makes MakerDAO a perfect DeFi ecosystem in terms of efficiency, stability and value.
Compound is another Ethereum-based DeFi cryptocurrency and is traded under the ticker COMP. COMP is a native token to the network, supporting the governance of the Compound protocol. The protocol allows users to lend and borrow ETH within a decentralized environment. The system is based on the idea of enabling borrowing and lending money in the form of cryptocurrencies with no central authority governing the system and no third parties taking an interest. Lenders can earn interest based on their supply used for lending and borrowers are paying interest on the borrowed amount. COMP is an ERC-20 type standard token and COMP token holders can delegate voting rights based on the number of Compound tokens kept in a digital wallet. Delegates may vote, propose and debate changes. Compound makes for an excellent way of borrowing and lending funds.
Kyber Network (KNC)
Kyber Network is a decentralized exchange that enables easy and simple swapping of Ether (ETH) and various ERC-20 type tokens. Kyber Network and its native token KNC allow for easy and instant token swaps without the need for registration and completely removes the need to exchange tokens via centralized exchange markets. The network is hosted on the Ethereum blockchain and was originally built for the Ethereum network, but any blockchain that operates with smart contracts can integrate the Kyber Network system.
This DeFi cryptocurrency is handy as it allows vendors to be paid in crypto while enabling instant swaps to match the preferred token or cryptocurrency in which a vendor would like to be paid. The system is also handy for Dapp users – access to Dapps is limited to accepted tokens, so to use a Dapp, a user would need to exchange their funds for suitable matching tokens. With Kyber Network, users can instantly swap tokens with no prior registration and gain access to any Dapp. Kyber Network has liquidity pools to support instant token swaps and can be integrated with smart contract blockchain environments, exchanges, wallets, Dapps and vendors.
Tomochain aims to solve the long-standing issues of scalability and interoperability, specifically attempting to solve issues with TX congestion that the Ethereum network is trying to resolve. Scalability is one of the biggest issues in the blockchain sector, while the third generation of crypto is emerging to try and resolve these problems and make blockchain technology more efficient. The project is testing Sharding, which is a mechanism that should enable instant transactions and facilitate scalability.
The dev team behind Tomochain claims that the project would be able to support between 20k and 30k transactions per second in the future once Sharding is integrated, providing the capacity to process up to 5,000 TX in a second. Besides that, TOMO has rather low fees for users, which contributes to the attractiveness of the network. Tomochain is not only built to provide fast transactions, but can also be used for Dapp creation, and decentralized value transactions. Tomochain has had an independent network – mainnet – since 2018, and has since introduced Proof-of-Stake-Voting as the network’s consensus mechanism.
Synthetix Network Token (SNX)
Synthetix is described as a derivatives liquidity protocol built on top of the Ethereum blockchain. The system enables the trading of synthetic assets, and also allows issuance for the same asset class. Synthetic assets are defined as ERC-20 type tokens and are otherwise known as Synths within the Synthetix network. These assets track prices of external assets, for instance, the value of the US dollar or a fiat value of other types. The system supports any type of assets that have a clear price, which includes fiat currencies, futures, commodities, cryptocurrencies and other assets that fit the definition. The system provides exposure for these assets on the blockchain, allowing a great variety of trading features. The system is based on a smart contract architecture and is supported by the value of the system’s native token, SNX. The value of the native token is directly related to collaterals and the usage of the network. The system was originally launched in 2017 under a different name – Havven (HAV).