Observer’s DeFi Dozen: The Hottest DeFi Companies of 2022

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Observ­er and Coin­Desk stud­ied mar­ket cap­i­tal­iza­tion, val­u­a­tion based on ven­ture invest­ment and more to iden­ti­fy the hottest DeFi com­pa­nies of 2022. Here they are.

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The idea of “cen­tral­i­ty” is, for his­tor­i­cal­ly under­stand­able rea­sons, cru­cial to the devel­op­ment of eco­nom­ic sta­bil­i­ty and growth. These days, almost every coun­try or eco­nom­ic bloc has a “cen­tral” bank, to ensure uni­for­mi­ty of things like mon­ey sup­ply and inter­est rates. Stock and bond exchanges are “cen­tral­ized” to ensure, among oth­er things, that there aren’t peo­ple set­ting up shop to sell the same finan­cial instru­ments at a dif­fer­ent price (this prac­tice was rou­tine in the 19th century). 

Yet we are liv­ing through a rev­o­lu­tion of decen­tral­ized finance (DeFi), in which tril­lions of dol­lars in annu­al trans­ac­tions take place in chan­nels that are not con­trolled by any one enti­ty, in part because a sig­nif­i­cant num­ber of the trans­ac­tions are across nation­al bor­ders. The poten­tial pow­er of this move­ment became pro­found­ly clear when the gov­ern­ment of Ukraine opened itself up for cryp­tocur­ren­cy con­tri­bu­tions fol­low­ing Russia’s hor­rif­ic invasion—and $100 mil­lion worth of cryp­to con­tri­bu­tions zapped through in a mat­ter of days. While cryp­tocur­ren­cy won’t over­throw the Russ­ian Army, the idea of deliv­er­ing emer­gency aid direct­ly across bor­ders, with no chance to be inter­cept­ed by war­lords or cor­rupt gov­ern­ments, has an obvi­ous appeal. 

The Observ­er has sought to cap­ture this ener­gy in our first annu­al DeFi Dozen, a non­ranked list of the most pow­er­ful and influ­en­tial enti­ties fuel­ing this rev­o­lu­tion. They are remak­ing not only the world of finance, but every­thing we think about the cre­ation of val­ue. Indeed, call­ing this a list of a dozen “com­pa­nies” is a mis­nomer; sev­er­al of these enti­ties are not struc­tured as com­pa­nies at all. They are more like glob­al­ly scat­tered choirs that have con­sent­ed to sing from the same songbook—yet togeth­er their voic­es can shat­ter glass. 

The size of the DeFi mar­ket fluc­tu­ates because even the largest coins and tokens shift dra­mat­i­cal­ly in val­ue, but many 2022 esti­mates put the total val­ue locked in DeFi pro­to­cols at over $100 bil­lion. The play­ers on this list are respon­si­ble for a huge chunk of that. Also worth not­ing: not one of the enti­ties on the DeFi Dozen is more than ten years old. 

How did we choose this list? To the great­est extent pos­si­ble, we based it on avail­able data: mar­ket cap­i­tal­iza­tion, val­u­a­tion based on ven­ture invest­ment, Github search results, men­tions on Coin­Desk. At the same time, these dozen enti­ties do very dif­fer­ent things, and so a sin­gle yard­stick can’t be applied, but almost every enti­ty on this list is a mar­ket leader in at least one way that fuels the DeFi economy. 

You may notice the absence of Bit­coin from this list. It’s almost cer­tain­ly true that with­out Bitcoin’s birth in 2008, none of the entries on The DeFi Dozen would exist, not in any­thing like their cur­rent form. But we want the list to reflect as much as pos­si­ble the prin­ci­ple of decen­tral­iza­tion. Arguably Bit­coin has trans­formed into a high­ly con­cen­trat­ed asset, both in min­ing (0.1% of all Bit­coin min­ers con­trol half of all min­ing capac­i­ty) and own­er­ship (1% of Bit­coin own­ers con­trol 27% of its supply). 

The Observ­er is very grate­ful to our edi­to­r­i­al part­ner Coin­Desk for guid­ance on cre­at­ing this list. 

The Glob­al Exchange: FTX

  • Launched: 2019 
  • HQ: The Bahamas 

Some­thing like ten per­cent of the cryp­tocur­ren­cy trad­ed every day around the globe takes place on FTX. The com­pa­ny has hired Tom Brady and Nao­mi Osa­ka to pro­mote to the mass­es. And yet, founder Sam Bankman-Fried, who just turned 30, tells the Observ­er that he wasn’t sure the com­pa­ny would pan out. “I was one of the most bull­ish inter­nal­ly on FTX—and thought there was an 80% chance it would fail to get trac­tion,” he said. 

In addi­tion to the company’s suc­cess, Bankman-Fried has emerged as a thought leader in the crypto/DeFi space. In Decem­ber, he tes­ti­fied before the House Finan­cial Ser­vices Com­mit­tee, emerg­ing as a cred­i­ble advo­cate of fed­er­al reg­u­la­tion, prefer­ably under a sin­gle, uni­fied reg­u­la­to­ry regime. “The dis­cus­sion was pro­duc­tive and bipar­ti­san, and it was great to be able to talk direct­ly with pol­i­cy­mak­ers,” he told the Observer.

FTX is also seri­ous about grow­ing cryp­to inter­na­tion­al­ly. It recent­ly announced a part­ner­ship with Nairo­bi-based AZA Finance to expand crypto’s pres­ence in Africa, and became the first exchange to obtain a cryp­to license in Dubai. 

Sam Bankman-Fried, founder and CEO of FTX, tes­ti­fies on Wednes­day, Decem­ber 8, 2021. (Pho­to By Tom Williams/CQ-Roll Call, Inc via Get­ty Images) 

The Accel­er­a­tor: Light­ning Labs

  • Found­ed: 2016 
  • HQ: San Francisco 

One of the long­stand­ing com­plaints about Bit­coin is that it is too slow to han­dle the vol­ume of trans­ac­tions that cur­rent­ly exists, much less will exist in the future. A sin­gle Bit­coin trans­ac­tion can take 10 min­utes or more to show up on the shared ledger. Light­ning Labs set out to fix that problem—not all at once, but through a series of tech­ni­cal inno­va­tions that make Bit­coin trans­ac­tions not just faster, but eas­i­er and more secure. The need for Light­ning Labs has been obvi­ous in the cryp­to com­mu­ni­ty for years; Bit­coin evan­ge­list Jack Dorsey was an ear­ly investor. 

Sim­ply put, Light­ning is a “Lay­er 2” pro­to­col that allows trans­ac­tions to be set­tled off of the blockchain, there­by speed­ing up the process. An esti­mat­ed 100,000 peo­ple are using the Light­ning Net­work, and oth­er cryp­tocur­ren­cies have adopt­ed it as well. Light­ning has also intro­duced ways to increase Bit­coin liq­uid­i­ty for users, which saves time and reduces trans­ac­tion fees. Lightning’s ulti­mate vision? One bil­lion Bit­coin users. 

Light­ning Labs cofounder and CEO Eliz­a­beth Stark (cour­tesy company) 

The Brand Name: Coinbase

  • Found­ed: 2012 
  • HQ: Dis­persed (for­mer­ly San Francisco) 

While of course Coin­base itself is not real­ly a DeFi com­pa­ny, it is nonethe­less by a very wide mar­gin the chan­nel through which most Amer­i­cans who invest in cryp­to find their way there. Bri­an Arm­strong and his team have exe­cut­ed bril­liant­ly on their vision to take cryp­tocur­ren­cy into the main­stream. About $3 bil­lion a day is trad­ed and the plat­form sup­ports near­ly 90 mil­lion users world­wide.
 
Coinbase’s first year as a pub­lic com­pa­ny has not been espe­cial­ly pleas­ant (in a mar­ket when most fin­tech stocks have suf­fered), but it still has a mar­ket cap­i­tal­iza­tion of about $45 bil­lion, which as of late March is about four times as high as Robin­hood (anoth­er com­pa­ny con­sid­ered for this list). 

NEW YORK, NY – APRIL 14: Mon­i­tors dis­play Coin­base sig­nage dur­ing the company’s ini­tial pub­lic offer­ing (IPO) (Pho­to by Robert Nickelsberg/Getty Images) 

The NFT Whale: OpenSea

  • Found­ed: 2017 
  • HQ: New York City 

When NFTs shot into pub­lic con­scious­ness in ear­ly 2021, even peo­ple who under­stood what they were wouldn’t nec­es­sar­i­ly have known how to cre­ate one, buy one or sell one. 

Among the dozens of sites where peo­ple can mint and trade NFTs, OpenSea imme­di­ate­ly estab­lished itself as the mar­ket leader. Con­sid­er: In Feb­ru­ary 2021, accord­ing to data com­piled by Dune Ana­lyt­ics, just over 41,000 NFTs sold on OpenSea. A year lat­er, the month­ly tal­ly was more than 2.1 million—5000% growth in a sin­gle year, although March wit­nessed a steep decline. 

OpenSea recent­ly raised $300 mil­lion in a Series C round led by the VC firms Par­a­digm and Coat­ue. This invest­ment val­ues the exchange at $13.3 bil­lion, com­pared to the $1.5 bil­lion val­u­a­tion it had in July. 

Pho­to Illus­tra­tion by Rafael Henrique/SOPA Images/LightRocket via Get­ty Images 

The Chal­lenger: Ethereum

  • Found­ed: 2015 
  • HQ: Zug, Switzerland 

Although sev­er­al promi­nent rivals have emerged in recent years, Ethereum remains the devel­op­ers’ dar­ling; a late March Github search for Ethereum shows some 48,000 repos­i­to­ry results, over 20 times more than coins like Cardano.

Almost no one out­side the Ethereum inner cir­cle could have pre­dict­ed how big the pro­to­col would become, or how quick­ly. Last year, Ethereum set­tled over $11.6 tril­lion in trans­ac­tions, far sur­pass­ing Bitcoin—and Visa.

A big test for Ethereum will come this sum­mer, as the net­work moves to a proof-of-stake mod­el, designed to make trans­ac­tions faster and more energy-efficient.

Ethereum co-founder Vita­lik Buterin speaks at ETH­Den­ver on Feb­ru­ary 18, 2022 in Den­ver, Col­orado. (Pho­to by Michael Ciaglo/Getty Images) 

The Wal­let: ConsenSys

  • Found­ed: 2014 
  • HQ: Brooklyn 

Con­sen­Sys has done a num­ber of dif­fer­ent things in its life­time, but arguably its crown­ing achieve­ment took place in 2021, as the NFT mar­ket took off. In a mat­ter of months, Meta­Mask became the wal­let for NFTs and oth­er Ethe­re­al trans­ac­tions. In July 2020, about 500,000 peo­ple a month used ConsenSys’s Meta­Mask; a year lat­er, it was ten mil­lion. The num­ber today is well over 20 million. 

Con­sen­Sys makes oth­er prod­ucts, includ­ing the devel­op­ment plat­forms Infu­ra and Truf­fle. But Meta­Mask is def­i­nite­ly dri­ving the busi­ness. In mid-March Con­sen­Sys raised a $400 mil­lion ven­ture round valu­ing the com­pa­ny at over $7 bil­lion, more than twice the val­u­a­tion of its Novem­ber 2021 Series C. 

Pho­to Illus­tra­tion by Pavlo Gonchar/SOPA Images/LightRocket via Get­ty Images 

The Sta­bi­liz­er: Tether

  • Found­ed: 2014 
  • HQ: Hong Kong 

The explo­sive growth in sta­ble­coins has been a boon for some and a headache for oth­ers. The con­cept of a dig­i­tal cur­ren­cy pegged to a real-world cur­ren­cy (such as the US dol­lar) has become extreme­ly use­ful in recent years, par­tic­u­lar­ly for those who want to trade one cryp­tocur­ren­cy for anoth­er with­out con­vert­ing into fiat mon­ey. Teth­er is the largest sta­ble­coin by val­ue (although USD Coin threat­ens to over­take it). 

Teth­er has been embroiled in numer­ous bat­tles with reg­u­la­tors, and the record is strong that it has not always lived up to its promise to back all its sta­ble­coin with US dol­lars on a 1:1 basis. And US offi­cials, includ­ing Trea­sury Sec­re­tary Janet Yellen, have made it clear that sta­ble­coin reg­u­la­tion is com­ing. But that shouldn’t threat­en Teth­er; if any­thing, reg­u­la­tion will like­ly encour­age more invest­ment in Teth­er and oth­er sta­ble­coins pegged to the US dol­lar. If, how­ev­er, the US gov­ern­ment were to com­mit to a cen­tral bank dig­i­tal cur­ren­cy, that might elim­i­nate a lot of sta­ble­coins’ utility. 

A woman holds a smart­phone with the Teth­er (USDT) logo dis­played on the screen. (Pho­to Illus­tra­tion by Rafael Henrique/SOPA Images/LightRocket via Get­ty Images) 

The 800-Pound Goril­la: Yuga Labs

  • Found­ed: 2021 
  • HQ: Dispersed 

This month wit­nessed the NFT world’s largest merg­er, in which Yuga Labs bought the intel­lec­tu­al prop­er­ty of Cryp­toP­unks and Meebits. But way before that—well, a few months before—Yuga Labs had cap­tured NFT cul­ture with the cre­ation of the Bored Ape Yacht Club. The founders’ iden­ti­ty was not pub­licly known until Buz­zfeed pub­lished two names in Feb­ru­ary.

Bored Ape art­works became cult col­lec­tors items, and helped fuel 2021’s red-hot NFT mar­ket. In recent weeks, the com­pa­ny was involved in the launch of ApeCoin, which imme­di­ate­ly hit a $12 bil­lion mar­ket cap­i­tal­iza­tion. In late March, a long-antic­i­pat­ed Andreessen Horowitz invest­ment in Yuga was announced a $450 mil­lion stake that val­ues the com­pa­ny at $4 billion. 

Peo­ple walk by a Bored Ape Yacht Club NFT bill­board in Times Square on Jan­u­ary 25, 2022 in New York City. (Pho­to by Noam Galai/Getty Images) 

The Col­lec­tive: MakerDAO

  • Found­ed: 2015 
  • HQ: Denmark 

In impor­tant ways, Mak­er­DAO embod­ies one of the most com­plete visions for DeFi that any­one has imple­ment­ed so far. (And like so many oth­er DeFi pio­neers, it is built on the Ethereum blockchain.) 

The mag­ic of Mak­er­DAO is that it allows users to col­lat­er­al­ize cer­tain cryp­tocur­ren­cy hold­ings in order to get loans in the form of a dol­lar-pegged sta­ble­coin (DAI). It is also gov­erned by the com­mu­ni­ty of token hold­ers, rather than by a group of engi­neers or busi­ness engi­neers. In 2020, Mak­er­DAO became the first DeFi pro­to­col to hit the $1 bil­lion mark in total val­ue locked into its smart con­tracts. Today that fig­ure is around $16 bil­lion, which puts Mak­er at the top of the chart by far. Ear­ly on, Andreessen Horowitz invest­ed in Mak­er­DAO and took con­trol of 6% of the total Mak­er­DAO token supply. 

Mak­er DAO logo (cour­tesy company) 

The Speed­ster: Avalanche/Ava Labs

  • Found­ed: 2018 
  • HQ: Brooklyn 

Avalanche, a plat­form is devel­oped by Ava Labs, is wide­ly con­sid­ered one of the most promis­ing alter­na­tives to the Ethereum blockchain. It bills itself as “blaz­ing­ly fast, low cost, and eco-friend­ly.” How fast? Accord­ing to Avalanche, the plat­form can achieve “trans­ac­tion­al final­i­ty” in less than two sec­onds, com­pared to six min­utes for Ethereum and 60 min­utes for Bitcoin. 

The coin asso­ci­at­ed with Avalanche, AVAX, launched in 2020 and quick­ly entered the top ten cryp­to coins by mar­ket cap­i­tal­iza­tion. Look for expan­sion into the world of gam­ing and the meta­verse, which can obvi­ous­ly ben­e­fit from increased speed. 

Pho­to Illus­tra­tion by Pavlo Gonchar/SOPA Images/LightRocket via Get­ty Images 

The Moon­shot: Ter­ra Luna

  • Found­ed: Token launched in 2019 
  • HQ: Seoul 

Ter­ra Luna is a clas­sic DeFi one-two punch: a platform/protocol that pays for itself by sell­ing two tokens—in the case of LUNA, the largest DeFi token by mar­ket cap­i­tal­iza­tion as of late March, with a mar­ket cap of $34 bil­lion. One aspect that sets the Ter­ra net­work apart is that it is built on Cos­mos SDK, a plat­form that allows for a high degree of customization. 

While some cryp­to (such as Bit­coin) have a fixed num­ber coins that will ever exist, and oth­ers add new coins as they see fit, Terra’s algo­rithm cre­ates new coins at exact­ly the rate of demand, which sta­bi­lizes val­ue with­out any­one need­ing to be in charge. 

The Mav­er­ick: Uniswap

  • Found­ed: 2018 
  • HQ: New York 

Like Coin­base and FTX, Uniswap is an exchange over which cryp­tocur­ren­cy is trad­ed, but unlike those Super Bowl adver­tis­ing behe­moths, Uniswap is gen­uine­ly decen­tral­ized. Traders deal direct­ly with one anoth­er, rather than going through a bro­ker-deal­er. That has cre­at­ed some fric­tion, since traders are not required to dis­close their iden­ti­ties. But it has also been wild­ly pop­u­lar; there are days when trad­ing vol­ume on Uniswap has been high­er than on Coin­base. More­over, Uniswap oper­ates on open-source soft­ware that can be adapt­ed to cre­ate oth­er exchanges.

Uniswap was found­ed by engi­neer Hay­den Adams, a few months after he’d been laid off from his first post-col­lege job. Ear­ly investors includ­ed Andreessen Horowitz and Union Square Ventures. 

Pho­to by Jakub Porzycki/NurPhoto via Get­ty Images 

Join a Video Dis­cus­sion on the DeFi Dozen on March 29

Join Observ­er and Coin­Desk for a dis­cus­sion with James Led­bet­ter, Observ­er Exec­u­tive Edi­tor, Lisa Car­men Wang Founder, Bad Bitch Empire and Joe Lautzen­his­er Edi­to­r­i­al Researcher and Strate­gist, CoinDesk


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