As most of you will know, DeFi stands for Decentralized Finance, and it is a fast growing sector of the crypto market. Some of the most popular DeFi projects are those that have been operating on the Ethereum blockchain for the past few years, like Maker DAO, Compound Finance and Aave.
These platforms are popular because they allow users to do things like lend money and earn interest on their crypto savings in a permissionless manner, which means that you don’t need to do things like upload your ID or find out your credit rating score!
The popularity of these platforms has seen their token prices soar, so much so that they are now considered to be ‘blue chip’ DeFi tokens, meaning that they maintain a high price because crypto users are so confident in the fundamental value of the projects.
But what about some of the newer DeFi projects of 2020 and 2021?
Well, we’ve had a good rummage through the DeFi world, and picked out 3 projects with interesting use cases that look like they might have a very exciting future!
First up is Polkastarter. Unlike the other DeFi projects we’ve mentioned so far, Polkastarter is built on top of the Polkadot blockchain. Polkadot’s biggest advantage is that it promotes blockchain interoperability, and Polkastarter takes advantage of that.
Polkastarter will function as a token swap protocol, a bit like Uniswap on the Ethereum network, except that Polkastarter will be able to swap tokens from across many different blockchains!
There is however another key feature that makes Polkastarter stand out from other decentralized exchanges that are being built on Polkadot. Polkastarter actually allows new DeFi projects to raise money on their platform without having to organise their own initial coin offering, also known as an ICO. This means that, even though Polkastarter is built on Polkadot, new projects can for the first time raise capital from multiple blockchains, not just the one they are launching on. Pretty cool.
Next up is Hegic, a decentralized options trading protocol that is built on Ethereum. In the world of traditional finance, the options market is a huge industry, as it allows traders to add more rules or clauses to their trades, which helps to protect them against large losses, or to secure their profits.
Let’s give an example, imagine that you bet that a certain horse would win a race. But you then write up a contract that states, if the horse falls over before the midpoint of the race, you would only lose half of your money, and not the entire bet.
Now also imagine that your horse was winning the race after it passed the midpoint, and you wanted to protect your potential profits against the risk that another horse would overtake it before the end. You could write a contract where it is agreed that, in this scenario, you settle for half of your profits and sacrifice the rest.
Smart contract platforms like Ethereum are perfect for this kind of trading, and a project like Hegic can help traders hedge their bets!
One of the exciting things about Hegic is that there is currently no clear market leader for decentralized options trading on the blockchain. For example, any new DeFi projects which offered lending and borrowing services would find it very hard to compete with big projects like Maker, Aave and Compound that are already fighting for their share of that market. But for the options market, it’s still anybody’s game!
Next up is OctoFi, a user-friendly dashboard that aims to make interacting with DeFi opportunities easy and convenient.
OctoFi is an open-sourced, community driven project, and all of the fees from the product are re-distributed back to OCTO token holders, which means that the developers have to make the project a success in order to profit themselves!
OctoFi has a pseudon3 exciymous lead developer called Dr Octavius, but has undergone an official audit from trusted third parties, as well as verification from the crypto research group Messari.
Anonymity on OctoFi is further mitigated with frequent ‘transparency reports’, which show what the team are working on and how OCTO tokens are being spent. Staying true to their world of ‘extending their tentacles across the DeFi space’, OctoFi has made numerous partnerships and integrated the functionality of many different DeFi protocols into the Octo dashboard.
Using OctoFi, you can buy NFTs on Open Sea, loan money on Aave, or make a token swap on 1InchExchange, without having to log in and out of different platforms. And it also makes activities like yield farming and liquidity mining more simple.
And perhaps most exciting of all, the OCTO team are working on improving the available options for their decentralized fiat on and off ramp. This will make it much easier for users to move money in and out of crypto, no matter their experience level. In many cases, using OctoFi is much more intuitive than interacting with the original platforms themselves, and tools like this are super important as crypto newbies start filtering into the DeFi space.
But as ever, you should be careful about investing in any platform before you fully understand the risks of the project, and this applies especially to new projects that haven’t been fully battle-tested by hacks, exploits and periods of low project liquidity. Be safe, and always do your own research!