The Top 7 DeFi Coins to Invest in for 2023

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Decen­tralised finance, also known as DeFi, is a wild­ly inno­v­a­tive tech­nol­o­gy that could com­plete­ly alter the finan­cial land­scape as we know it. While NFTs took the spot­light for a while and then petered out, the DeFi trend is still going strong. But with so many top DeFi projects on the mar­ket, where do you start?

In this arti­cle, we’re analysing the sev­en top DeFi coins that you should con­sid­er invest­ing in to get in ear­ly on this finan­cial revolution.

What is Decentralised Finance (DeFi)?

Decen­tralised finance (DeFi) is used as an alter­na­tive to the cen­tralised bank­ing sys­tem. Tra­di­tion­al­ly, banks and pay­ment providers offer a way to trans­act and lend cash, but this often comes with trade-offs, like fees, a lack of pri­va­cy, and a loss of con­trol. While these inter­me­di­aries can make the world of finance sim­pler, they require a cer­tain amount of trust and sta­bil­i­ty to func­tion. And in infla­tion-rav­aged coun­tries like Argenti­na and Venezuela, DeFi presents an alter­na­tive way to pro­tect your money’s value.

DeFi offers a way for any­one to start par­tic­i­pat­ing in the peer-to-peer finan­cial world with vir­tu­al­ly no restric­tions. Because every­thing is stored on an open ledger, code can be writ­ten to per­form all kinds of finan­cial activ­i­ties. All you need is an inter­net con­nec­tion to get started!

So what can you actu­al­ly do with DeFi?

You can:

Prac­ti­cal­ly any­thing you can do in the tra­di­tion­al world of finance, you can do with DeFi.

Meta­cade is a com­mu­ni­ty hub that’s built to be the heart of Game­Fi. Game­Fi is a twist on the tra­di­tion­al gam­ing mod­el, com­bin­ing finance and gam­ing to cre­ate an entire­ly new expe­ri­ence. Game­Fi is typ­i­cal­ly bet­ter known as play to earn or P2E, which is a sys­tem that com­bines NFTs, cryp­to, and blockchains to allow play­ers to earn while gaming.

The Game­Fi indus­try is set to explode at 10x the rate of tra­di­tion­al gam­ing by 2025, accord­ing to some sources. And among the projects’ Meta­cade is posi­tioned to become the num­ber one des­ti­na­tion in Web3 for Play2Earn. In Meta­cade, users will be able to link up with like-mind­ed gamers, cryp­to investors, devel­op­ers, and entre­pre­neurs to dis­cov­er the vir­tu­al­ly unlim­it­ed poten­tial of Game­Fi. It’s a plat­form users can come to vis­it to find the lat­est games, learn how to earn more from them, and also direct­ly influ­ence the future of gaming.

Metacade’s plan is to be an all-in-one solu­tion to the prob­lem of increas­ing cen­tral­i­sa­tion in the gam­ing indus­try by allow­ing users to vote on the games they want to see devel­oped. Meta­cade is let­ting game devel­op­ers do just that with Meta­grants, which are pow­ered by MCADE. To win Meta­Grant fund­ing, devel­op­ers post their ideas into a com­pe­ti­tion along­side dozens of oth­ers. The Meta­cade com­mu­ni­ty vote for their favourite, and the win­ner receives both fund­ing from the trea­sury and sup­port from com­mu­ni­ty mem­bers to build a pol­ished game. The final game is then added to Metacade’s vir­tu­al arcade for any­one to play.

In return for con­tribut­ing reviews, Game­Fi alpha, or long-form con­tent, users are also reward­ed with the MCADE token for sim­ply shar­ing their exper­tise and grow­ing the com­mu­ni­ty. Once the com­mu­ni­ty flour­ish­es, the Meta­cade team will step back and hand over the reins to its mem­bers, allow­ing them to vote on the future direc­tion of the platform.

Giv­en Metacade’s inno­v­a­tive ideas that are set to shake up the gam­ing indus­try, we’re crown­ing it as the king of the top DeFi coins. While it might be slight­ly dif­fer­ent from the more tra­di­tion­al top DeFi projects on this list, the future prospects of Game­Fi and the rate at which it’s grow­ing rep­re­sents an out­stand­ing oppor­tu­ni­ty for Meta­cade to quick­ly rise up the ranks and become a leader in its field.

»> You can par­tic­i­pate in the Meta­cade pre-sale here «<

2. PancakeSwap (CAKE) — Staking and Swapping

Pan­cakeSwap is a decen­tralised exchange that acts as an alter­na­tive to cen­tralised exchanges, like Binance or Coin­base. Built atop the BNB Chain, Pan­cakeSwap allows users to swap their coins for BEP20 tokens, which are tokens that use the BNB Chain. Tra­di­tion­al­ly, exchanges require one par­tic­i­pant to be matched with a coun­ter­par­ty. Decen­tralised exchanges oper­ate by allow­ing users to trade with liq­uid­i­ty pools instead.

Liq­uid­i­ty pools allow those with a par­tic­u­lar token, say Binance Coin (BNB), to lock up their funds to pro­vide liq­uid­i­ty to oth­ers. When some­one wants to swap their token for BNB, an auto­mat­ed mar­ket mak­er (AMM) deposits their token into the pool and with­draws the BNB. For those pro­vid­ing liq­uid­i­ty, they’re reward­ed with liq­uid­i­ty provider tokens, like the platform’s native CAKE, in return for lock­ing up their tokens.

While this offers an excel­lent way to diver­si­fy and earn from your cryp­to port­fo­lio, yield farm­ing is the real ben­e­fit of Pan­cakeSwap. Farms are basi­cal­ly stak­ing pools that allow you to earn even more by lock­ing up your hold­ings. Using your liq­uid­i­ty provider tokens, you can deposit them into farms and auto-rein­vest your inter­est to take advan­tage of com­pound interest.

The rev­enue streams and high yields Pan­cakeSwap offers have attract­ed over 400,000 dai­ly active users, accord­ing to Decrypt, with over $2.8 bil­lion locked on the plat­form as of Octo­ber 2022. It holds the #8 spot on DeFiLla­ma in Octo­ber 2022 as one of the top DeFi coins and #2 on our list.

3. Uniswap (UNI) — Direct Coin Swaps

Uniswap is anoth­er decen­tralised exchange, except it runs on the Ethereum blockchain, and is one of the top DeFi projects on the mar­ket today. This means instead of BEP20 tokens, users are able to seam­less­ly trade any two ERC20 tokens togeth­er with­out using a cen­tralised exchange. Uniswap was the first major decen­tralised exchange to hit the main­stream and has stayed in pole posi­tion ever since.

Like Pan­cakeSwap, Uniswap uses liq­uid­i­ty pools to offer direct swaps for its users while reward­ing liq­uid­i­ty providers with the UNI token. Part of what makes Uniswap unique is its pric­ing mech­a­nism known as the Con­stant Prod­uct Mar­ket Mak­er Model.

Let’s say you want­ed to cre­ate a pool for an alt­coin called X Coin to trade with Ethereum, you could deposit $100 worth of X Coin and $100 worth of Ethereum. When some­one buys X Coin with Ethereum, the sup­ply of X Coin decreas­es while the Ethereum sup­ply increas­es, caus­ing the price of X Coin to go up. This cre­ates a pric­ing mod­el deter­mined by sup­ply and demand with­out need­ing a cen­tralised order book.

Uniswap takes the lead over Pan­cakeSwap, with a total of 2.5 mil­lion users, accord­ing to Decrypt, and a total val­ue locked of $4.67 bil­lion. It cur­rent­ly sits at #16 on the list of the top cryp­tocur­ren­cies by mar­ket cap, and at #5 on DefiLlama’s list of top DeFi coins.

4. Compound (COMP) — Lending and Borrowing Crypto

While Pan­cakeSwap and Uniswap are focused on exchang­ing tokens, Com­pound facil­i­tates the lend­ing and bor­row­ing of a wide range of cryp­to tokens with­out the need for a cen­tralised author­i­ty. Tra­di­tion­al­ly, you need to go to a bank to receive a loan, which is sub­ject to your finan­cial sta­tus, back­ground, and oth­er fac­tors that may impact your abil­i­ty to bor­row. With Com­pound, you can bor­row with­out restric­tion or the need to expend time and effort deal­ing with intermediaries.

In real­i­ty, the way Com­pound works is not dis­sim­i­lar to a bank. Lenders deposit their cryp­to to the plat­form, and are award­ed a new token called a cTo­ken, like cETH, cDAI, or cUS­DT, which rep­re­sents the deposit. These cTo­kens can be trad­ed with­out restric­tion but can only be redeemed for the cor­re­spond­ing cryp­to token, which can be done at any time. The inter­est rate earnt is depen­dent on the sup­ply of the deposit­ed token on the mar­ket. The less sup­ply, the greater the inter­est rate, and vice versa.

Bor­row­ers put up col­lat­er­al to receive a set per­cent­age of the col­lat­er­al put up in the form of the same or anoth­er cryp­tocur­ren­cy. This holds sev­er­al advan­tages, the fore­most being you don’t need to sell your cryp­to assets (which is a tax­able event) to access liquidity.

Com­pound is one of the top DeFi projects on the mar­ket today, with a total of $2.3 bil­lion locked on its plat­form, sit­ting at #9 on DefiLlama’s list of top DeFi coins.

5. Curve (CRV) — A focus on StableCoins

Curve is an auto­mat­ed mar­ket mak­er plat­form, like Pan­cakeSwap and Uniswap. The key dif­fer­ence is that while these two focus on a wide range of cryp­tocur­ren­cies, Curve is built around sta­ble­coins. It was launched with the inten­tion of cre­at­ing a kind of decen­tralised exchange that offered low fees for traders while giv­ing liq­uid­i­ty providers bank-beat­ing inter­est rates on their fiat currency.

While Uniswap and Pan­cakeSwap might offer high­er rewards, they also come with high­er risk. These plat­forms allow swaps between any two tokens, mean­ing that volatil­i­ty is high. When volatil­i­ty is high, the risk of imper­ma­nent loss increas­es. Imper­ma­nent loss is a phe­nom­e­non found in AMM plat­forms where those pro­vid­ing liq­uid­i­ty lose more token val­ue rel­a­tive to the mar­ket val­ue of the token because of high volatility.

Curve min­imis­es this because swap­ping sta­ble­coins means they are rel­a­tive­ly sim­i­lar in price. When USDT is swapped for USDC, for exam­ple, the sup­ply of USDC decreas­es while the sup­ply USDT ris­es, caus­ing a slight fluc­tu­a­tion in price. Curve’s algo­rithms auto­mat­i­cal­ly rebal­ance the pool with ease, min­imis­ing the risk of imper­ma­nent loss.

Curve is one of the top DeFi projects and #5 on our list for this rea­son. It favours sta­bil­i­ty over spec­u­la­tion, and while it offers low­er inter­est rewards than the two plat­forms men­tioned, it’s cor­nered a niche in the DeFi mar­ket. You’re also paid CRV tokens for lock­ing up your tokens, which can be yield-farmed like CAKE and UNI.

Because of this sta­bil­i­ty, Curve is ranked as one of the top DeFi coins by total val­ue locked, accord­ing to DeFiLla­ma. It cur­rent­ly has $5.86 bil­lion locked on its plat­form, hold­ing the #3 spot on DeFiLlama’s list.

6. Aave (AAVE) — Flash Loans and Fast Transaction Speeds

Aave is a bor­row­ing and lend­ing plat­form like Com­pound. It would be redun­dant to explain the process again, but just know that it is very sim­i­lar to Compound’s sys­tem, in that bor­row­ers put up col­lat­er­al to receive a per­cent­age in the form of a loan, while lenders receive vari­able inter­est rates for the liq­uid­i­ty they add.

Where Aave dif­fers from Com­pound is in its abil­i­ty to offer flash loans. For a flash loan to be suc­cess­ful, the bor­row­er must pay back the loan before the block is finalised, along with a 0.09% fee. If they don’t, then the trans­ac­tion is can­celled. These flash loans allow traders to auto­mat­i­cal­ly take advan­tage of arbi­trage oppor­tu­ni­ties across dif­fer­ent exchanges, with­out the need for a large amount of capital.

Because of this fea­ture, Aave is con­sis­tent­ly ranked as one of the top DeFi projects on DeFiLla­ma. It’s ranked #4, just below Curve, with a total val­ue locked of $5.14 billion.

7. MakerDAO (MKR) — Total Decentralisation

Mak­er­DAO is a plat­form sim­i­lar to Com­pound and Aave, but with much big­ger ambi­tions. Mak­er­DAO is part of a larg­er ecosys­tem that aims to be a com­plete­ly decen­tralised, trust­less bank­ing sys­tem that doesn’t require actu­al banks. This has made Mak­er­DAO the top DeFi project by total val­ue locked, accord­ing to DeFiLlama.

It has its own sta­ble­coin, DAI, that’s pegged against the US dol­lar. DAI is cre­at­ed when­ev­er a user locks up their tokens to take out a loan in DAI. Loans are heav­i­ly over­col­lat­er­alised, mean­ing that if a user want­ed to lend $1000 at the cur­rent col­lat­er­ati­sa­tion rate of 135%, they would need to put up $1350 of collateral.

This pro­tects Mak­er­DAO and DAI against large fluc­tu­a­tions in the price of the col­lat­er­alised assets, which are liq­ui­dat­ed once a cer­tain thresh­old is reached. The greater the lev­el of col­lat­er­al­i­sa­tion, the more the val­ue of the locked assets would need to fall before DAI los­es its 1:1 sta­tus with the dollar.

While this sys­tem works effec­tive­ly, there are times when adjust­ments need to be made. This is where Mak­er­DAO comes in. Hold­ers of the MKR token can vote to shift the mon­e­tary pol­i­cy of the Mak­er ecosys­tem, adjust­ing sav­ing rates and the tokens back­ing Mak­er. In March 2020, for exam­ple, hold­ers of MKR saved Mak­er by vot­ing to back DAI with USDC, sta­bil­is­ing its price while mass liq­ui­da­tion occurred.

There are plen­ty of com­pet­ing projects to Mak­er, but the DAO’s abil­i­ty to func­tion like a cen­tral bank makes it the top DeFi project for lend­ing and bor­row­ing. This has led to Mak­er­DAO dom­i­nat­ing the DeFi space, rank­ing #1 on DeFiLlama’s leader­board with a total val­ue locked of $7.7 bil­lion — more than Pan­cakeSwap and Uniswap combined.

Conclusion

Hope­ful­ly this list has helped you nar­row down the top DeFi coins to invest in for the future of finance. While there are plen­ty of incred­i­ble projects on this list, Meta­cade has to be our num­ber one choice for invest­ment poten­tial. Com­bined with its out­stand­ing ideas for com­mu­ni­ty engage­ment and sim­pli­fy­ing the world of Play2Earn, we see a bright future ahead for Metacade.

As the token is still in pre­sale, Meta­cade rep­re­sents an excit­ing oppor­tu­ni­ty to get in on the ground floor to par­tic­i­pate in the rapid accel­er­a­tion of the Game­Fi industry.

You can par­tic­i­pate in the Meta­cade pre-sale here.

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