WHAT IS DEFI EXACTLY?
Before we get into an article expanding upon the top DeFi projects and tokens you should watch you for in the year 2023 – let us first quickly understand what DeFi exactly is. DeFi is the abbreviation for Decentralized Finance, an emerging form of financial technology that relies on the decentralized nature of the distributed ledger system of the blockchain technology. The system is being built for a world that removes the need for a reliance on trusted third party intermediaries in financial services like banks and financial institutions.
To know more, read: Decentralized Finance Explained for Beginners
Now that you have a basic understanding of the DeFi space and the ecosystem in general – let us get into the most interesting part of the conversation – which are the crypto DeFi projects and tokens you need to watch out for in 2023?
UNISWAP
Uniswap is the first DeFi token you should know about going into the new year and there are several reasons why this token features as the first on the list of top DeFi tokens you need to watch out for in 2023. Founded in 2018, Uniswap (UNI) is one of the most popular decentralized trading protocols and is a market leader in the space, by its total-value-locked (TVL). It became wildly popular within the crypto space for building the automated market maker (AMM) system to facilitate automated trading of DeFi tokens without any centralized intermediary. Thanks to this, it gained a lot of traction, both in terms of token price and popularity in the bull run of 2021, when DeFi took central stage.
The Uniswap ecosystem was built with the objective of keeping the trading of tokens completely automated and open to anyone who is holding the tokens. They are wholly committed to improving the efficiency of the trading to bring it at par with that of traditional exchanges. Its native token, UNI, is a governance token and helps to create this efficiency in trading by solving liquidity issues with automated solutions like DEXes.
Read more: Uniswap Price Prediction
CHAINLINK
Founded in 2017, Chainlink is a blockchain ecosystem that served as an abstraction layer for enabling smart contracts connected universally. Chainlink is essentially a decentralized oracle network that provides the required stream of data to the smart contracts running on various blockchain platforms and smart contracts. The main objective of the blockchain system is to make smart contracts even more powerful by enabling the smart contracts to draw inputs from various sources in a decentralized manner.
The kinds of data supplied by the oracles in the Chainlink ecosystem can be very varied, ranging all the way from supply chain management to price feeds, smart sensor temperature data inputs, scores in a cricket match, etc to various decentralized applications (dApps). It is able to service all blockchain network because it has no native blockchain but rather integrated with various blockchains to provide relevant information. It also works as an oracle aggregator, apart from being an oracle itself. The data from several data providers are purchased by Chainlink which is then streamed to various blockchains accordingly.
Read more: Chainlink Price Prediction
TEZOS
Tezos is a distributed ledger platform that was designed with the objective to be able to run smart contracts with an on-chain governance model. This on-chain governance model enables upgrading the blockchain without the need for hard forks. Thus, it also defines itself as a self-amending decentralized platform to build and run smart contracts on.
It is a bit similar to Ethereum – the largest platform when it comes to building and running smart contracts and supports dApps, but it is its functioning that makes it unique and different from others. The ‘self-amending’ feature as mentioned earlier is what sets it apart from other blockchain networks – thanks to which it is able to improve and upgrade the platform without actually splitting the community – which is what happens during hard forks and stop value depreciation. Hence this self-amending nature of Tezos’ protocol makes the blockchain network much easier to upgrade and always open to adding new features and innovations to the network. This is the reason why this token features on the list of top DeFi tokens for 2023 that you should watch out for.
AAVE
The next token on the list of top DeFi tokens you need to look out for in 2023 is Aave. Aave is another extremely popular decentralized finance (DeFi) protocol that enables people to access truly decentralized financial services like lending and borrowing of cryptos and real world assets (RWAs). In a true decentralized fashion, it is built in such a way that it removes the need for a centralized intermediary to enable the process and even have systems in place to recover funds from borrowers like obtaining interest payments due to lenders.
According to data from DefiLlama, a very popular DeFi data aggregator platform – Aave is the third largest DeFi protocol by total-value-locked (TVL). It was initially built on top of the Ethereum network, and catering to only ERC-20 tokens but as it grew more and more popular, it began to expand into other chains like Avalanche, Fanton and Harmony.
Read more: Top Smart Contract Platforms
MAKERDAO
MakerDAO is a peer-to-peer decentralized autonomous organization built on the Ethereum blockchain network that allows people to lend and borrow using cryptos. This lending and borrowing mechanism is run by smart contracts, very similar to other DeFi protocols.
It also takes things a step further by creating and using a stablecoin known as Dai to determine lending rates, and repayable amounts for the loans taken by users on the platform. This is done to mitigate the risk of volatility in the crypto assets taken as collateral.
MakerDAO’s main objective is to create a crypto lending and credit platform that disburses loans at predetermined interest rates to those in need. If a MakerDAO user wants to borrow a certain crypto for whatever purpose, they can deposit a determined value of ETH into the Maker smart contract. Now the MakerDAO smart contract creates what is called as a Collateralized Debt Position (CDP) and disburses the loan.
Additional Read: Top DAO Projects to look out for in 2023
TOP DEFI TOKENS TO INVEST IN 2023: A SUMMARY
| Name | Uniswap | Chainlink | Tezos | Aave | MakerDAO |
| Launch Date | 2018 | 2017 | 2018 | 2017 | 2017 |
| Founder | Hayden Adams | Sergey Nazarov | Arthur and Kathleen Breitman | Stani Kulechov | Rune Christensen |
| Blockchain Protocol | Ethereum | Ethereum | Tezos | Ethereum | Ethereum |
| Native Token | UNI | LINK | XTZ | AAVE | MKR |
| Token Type | Governance Token | ERC 677 | Governance Token | Utility | Governance |
| Market Cap | $4 billion | $3.1 billion | $740 million | $780 million | $540 million |
| Circulating Supply | 762 million UNI | 507 million LINK | 920 million XTZ | 14 million AAVE | 977,631 MKR |
| Max Supply | 1 billion | 1 billion | NA | 16 million AAVE | 1.005 million MKR |
| Consensus Method | Proof of Stake | Proof of Stake | Proof of Stake | Proof of Stake | Proof of Stake |
CONCLUSION
Thus, this article encompasses a list of five of the top DeFi crypto projects and their respective tokens that you can invest in. While these projects have a strong use case and utility coupled with strong community and user base – the recent run of the bear market in 2022 has put all of these coins under pressure. While that could seem risky, it could also be looked at as an opportunity to buy good projects at attractive valuations. However, investors and traders should do their own thorough research before investing in cryptos as this is an extremely volatile market.
Additional read: 5 Ways to Survive the Crypto Bear Market: Beginners Guide
SO, HOW CAN YOU INVEST IN THESE PROJECTS?
Today investing in these Ethereum based project tokens is extremely simple with the CoinDCX App! Just download the CoinDCX crypto investing app, enter the details required and wait for your profile to get verified. Once done, fund your wallet and buy any of the coin of your choice.