Grace Malik 
Decentralized Finance (DeFi) platforms are financial applications built on blockchain networks that seek to eliminate intermediaries and provide users with open, permissionless, and transparent financial services.
These platforms use smart contracts to automate various financial functions, such as lending, borrowing, trading, and other economic activities.
Why is it important to know about these DeFi platforms?
Understanding and keeping up-to-date on DeFi platforms is essential for multiple reasons. DeFi provides various financial services, including lending, borrowing, yield farming, decentralized exchanges, and synthetic assets.
By familiarizing yourself with these platforms, you can access many economic opportunities and potentially generate passive income using various DeFi strategies.
In the financial industry, DeFi platforms are at the vanguard of innovation. They examine new governance models, develop decentralized derivatives markets, enhance liquidity provision, and experiment with novel financial instruments.
Keeping abreast of these advancements enables you to participate in cutting-edge innovations and potentially profit from emerging trends.
In addition, DeFi platforms typically operate with a high degree of transparency and provide users with greater control over their funds.
By utilizing blockchain technology, DeFi platforms eliminate the need for intermediaries, thereby reducing costs and enhancing accessibility.
However, it is essential to note that DeFi carries risks, such as smart contract vulnerabilities and market volatility, so it is crucial to educate yourself and exercise caution when using these platforms.
Top Ten DeFi Platforms That You Must Know About in 2023
Here are our very top ten decentralized finance (DeFi) platforms for 2023 that you should be aware of:
- Uniswap
- Compound
- Aave
- MakerDAO
- Synthetix
- Yearn.finance
- SushiSwap
- Balancer
- Curve Finance
- Pancake Swap
Uniswap
Uniswap is a protocol for a decentralized exchange (DEX) based on the Ethereum blockchain. Users can trade Ethereum-based tokens immediately from their wallets.
For token exchanges, Uniswap makes use of liquidity pools. In addition, Uniswap does not offer any limited orders at this time.
You can exchange any ERC-20 token on Uniswap or provide liquidity to the protocol while earning fees. Users can add liquidity to an existing pool or establish their own.
Creating a liquidity pool on Uniswap is straightforward; you only need to provide a token pair for markets, and you are good to go. Utilizing Uniswap’s “constant product market maker” mechanism, market makers establish exchange rates.
Fluctuations in asset prices between token pairings generate arbitrage opportunities, which encourages additional trading.
All liquidity providers receive a 0.3% fee proportional to the quantity of liquidity supplied, and liquidity can be withdrawn at any time.
Compound
Compound is a decentralized lending and borrowing platform enabling users to borrow cryptocurrencies through smart contracts.
According to its description, Compound is an algorithmic money market protocol based on Ethereum. Using Compound, users can lend assets to generate liquidity or take out loans using their cryptocurrency as collateral.
As suggested by the name, interest accrues instantaneously and compounds for the duration of the liquidity provided to the protocol. When assets are supplied to the Compound protocol, tokens represent balances, which can serve as collateral or receive interest.
Compound permits users to take out over-collateralized loans, borrowing up to 75% of their initial collateral. The ability to add or remove collateral is unrestricted, but it is simple to liquidate debts that are inadequately secured.
The protocol has been audited and formally verified to support a variety of assets. In May 2020, the platform became decentralized by transferring governance to COMP token holders.
Aave
Aave is characterized as an open-source, non-custodial protocol built on the Ethereum blockchain. This platform provides a modern, user-friendly interface for decentralized lending and borrowing.
It employs smart contracts to permit users to deposit their assets into liquidity pools, earn interest, and acquire assets using collateral.
When providing liquidity as a lender on Aave, the protocol mints tokens to the value of the assets supplied. As an Aave lender, you earn interest instantaneously, which compounds in real-time. This increases the lender’s tokens, which can be transmitted, exchanged, or deposited elsewhere.
Aave accepts various assets as collateral, each offering multiple interest rates and liquidation penalties. The protocol’s liquidity reserve makes it possible for users to withdraw funds at any time.
MakerDAO
MakerDAO is an Ethereum-based decentralized platform for borrowing and lending. The DAO (Decentralized Autonomous Organization) is maintained by holders of the MKR governance token, who can determine the future of the protocol by voting for or against proposals to modify the platform.
MKR and DAI are Maker’s principal assets. MKR and DAI both function as ERC-20 tokens. On the Maker platform, transaction fees are paid in MKR, which is the platform’s collateral basis. MKR cannot be mined, it is destroyed concerning fluctuations in DAI prices to maintain its dollar peg, and it functions as a governance token.
Maker provides over-collateralized DAI loans up to 66 percent of the value of the depositor’s collateral. When vaults fall below this rate, they incur a 13% penalty and must be liquidated to avoid default. The collateral that has been liquidated is resold at a 3 percent discount.
Maker produces the stablecoin DAI, which is used in the majority of significant DeFi projects. Maker can be used to establish a vault, secure crypto collateral, and issue DAI as a debt against the collateral.
Synthetix
Synthetix is a platform for the decentralized issuance of synthetic assets. It enables users to construct and trade synthetic assets, such as cryptocurrencies, commodities, and fiat currencies, using SNX tokens as collateral.
Synthetix was rebranded from the stablecoin project Havven and launched on the main net in February 2019 after a change in strategy and renaming. Synthetix is a decentralized Ethereum-based platform that enables the creation of Synths, or synthetic assets.
Synths monitor the value of real-world assets on the blockchain and allow crypto holders to use their funds to trade non-crypto assets on a decentralized cryptocurrency-based platform.
Synthetix enables users to trade more than 30 Synths that represent a variety of equities, commodities, and indices, with plans to expand the platform’s current derivatives offerings.
In addition to several other crypto assets, the native ERC-20 SNX token can be used as collateral to mint freely tradable Synths.
Synthetix also has a non-custodial DEX, from which SNX holders and Synth minters earn a percentage of transaction fees. This encourages users to construct synths and adds value to the SNX token.
Yearn.finance
Yearn.finance is a yield aggregator that autonomously transfers funds between various DeFi protocols to maximize returns. It seeks to simplify the process of yield farming by providing users with strategies for achieving the highest yields.
The yearn.finance platform is a distributed ecosystem incorporating lending services such as Aave, Compound, and Dydx. Built by Andre Cronje, control of the protocol has since been transferred to a multi-signature wallet that requires a majority of participants to agree on any protocol changes, as proposals and ballots are recorded on-chain.
Yearn allows users to deposit assets and convert them into tokens. The protocol automatically rebalances your liquidity provider to maximize yield by redistributing liquidity to the most lucrative lending service. Curve.fi is one of the most significant token integrations. The Curve AMM (Automated Market Maker) earns user lending and trading fees.
Governance token for yearn.finance YFI is distributed to users of the platform who supply liquidity using tokens. YFI is regarded as one of the most decentralized DeFi platforms due to the fact that there was no pre-mine or token allocation before commencement.
SushiSwap
SushiSwap is a protocol for a decentralized exchange and automated market maker (AMM) that functions identically to Uniswap. It permits users to trade tokens and partake in the provision of liquidity by staking their assets in liquidity pools.
Balancer
Balancer is an automated market maker constructed on the Ethereum blockchain. This platform enables users to build liquidity pools that can be customized or to add existing liquidity pools to earn trading fees.
Balancer permits any number of weight tokens to exist in a pool. Traders rebalance pools, while liquidity providers collect commissions on these transactions. The Balancer platform is constructed with multiple varieties of pools and a composable design.
Curve Finance
Curve Finance is a decentralized exchange and liquidity pool constructed on Ethereum, which will be released in January 2020. The curve was created for super-efficient stablecoin trading, enabling users to trade with minimal slippage and low fees.
Curve supplies liquidity to other protocols, such as Compound or yearn.finance, to maximize the fees earned by liquidity providers.
Seven Curve pools share the available liquidity. Each pool mints its own ERC-20 token, which can then be exchanged for a variety of assets, and distributes these tokens to liquidity providers. Curve is striving for integrity in the DeFi space.
PancakeSwap
PancakeSwap is a decentralized exchange and AMM protocol based on the Binance Smart Chain (BSC). It provides comparable functionality to Uniswap but operates on the BSC network, which has lower transaction fees than Ethereum. It is also one of the best DeFi platforms out there.
Conclusion
Decentralized finance platforms are reshaping the financial landscape by providing open and accessible financial services facilitated by blockchain technology.
By familiarizing yourself with these DeFi platforms, you can access new opportunities, remain on the cutting edge of financial innovation, and potentially reap the benefits of decentralized finance.
However, conducting exhaustive research is essential, as comprehending the hazards involved and making well-informed decisions when interacting with DeFi platforms.
