7 Best Decentralized Finance (DeFi) Tokens In Crypto [2024] (2024)

Decentralized finance, sometimes known as “DeFi,” has grown in popularity in the last year, with billions of dollars coming into various protocols and initiatives.

As an investor, navigating the quickly growing DeFi industry and identifying the finest coins to add to your portfolio can be difficult.

In this blog article, we’ll explore at some of the best DeFi coins to consider for investment in 2023.

These coins have strong teams, good use cases, and significant growth potential as the DeFi ecosystem matures and expands.

Key Takeaways:

1. DeFi refers to financial applications built on blockchain technology that operate independently of traditional financial institutions.
2. The best DeFi tokens are Uniswap, MakeDAO, Balancer, Lido Finance, etc.
3. Deciding the best DeFi tokens involves conducting thorough research, evaluating the project’s fundamentals, such as its use cases and team, monitoring its market performance, and assessing its potential for growth and adoption in the DeFi ecosystem.

List of 7 best Defi Tokens to Invest in 2023

1. Uniswap (UNI): Best DEX on Ethereum Blockchain
2. Aave (AAVE): Best Defi Lending Platform
3. PancakeSwap (CAKE): Top BSC-based DEX with low fees
4. MakerDAO (MKR): Best Defi platform for borrowing DAI Stablecoin
5. Lido finance (LDO): Best Defi liquid staking solution for Ethereum
6. Curve DAO Token (CRV): Top DEX for Stablecoins Liquidity
7. Balancer (BAL): Best Defi Yield Farming & AMM

Comparison between Top Defi Tokens

TVL (Total Value Locked) refers to the total value of assets that are currently being held in the platform, either in smart contracts or as collateral for loans. This is a measure of the platform’s popularity and liquidity. (TVL Source: https://defillama.com)

1. Uniswap (UNI): Best DEX on Ethereum

Uniswap is a decentralized exchange (DEX) built on the Ethereum blockchain that allows users to buy and sell tokens in a peer-to-peer manner without the need for a central authority.

It is an open protocol that enables anyone to operate a marketplace for tokens, and it was one of the first DEXs to gain widespread popularity.

Uniswap uses a unique liquidity-provider mechanism to facilitate trades. Instead of relying on order books like traditional exchanges, Uniswap allows users to provide liquidity to the platform in the form of token pairs.

These liquidity providers earn a small fee on every trade that occurs on the platform.

Key Features of Uniswap

1. Decentralized: Uniswap is not governed by a single entity.
2. Uniswap is an automated market maker that employs algorithms to set trading prices.
3. Custom trading pairings: On the platform, users may construct their own trading pairs.
4. Cheap costs: When compared to other DEXs, Uniswap offers comparatively low fees.
5. Uniswap supports a wide variety of Ethereum-based coins.
6. Simple to use: Uniswap offers an easy-to-use UI.
7. For safe exchanges, Uniswap employs smart contracts.

2. Aave (AAVE): Best DeFi Lending Platform

Aave is a decentralized finance (DeFi) protocol that allows users to lend and borrow a variety of cryptocurrencies. It was founded in 2017 and launched on the Ethereum blockchain in January 2018.

Aave has “flash loan” functionality, which allows users to borrow large amounts of cryptocurrency without collateral for a very short period of time, typically just a few minutes. Flash loans can be used for arbitrage and other trading strategies, as well as for providing liquidity to other DeFi protocols.

In addition to flash loans, Aave also offers traditional lending and borrowing services. Users can deposit their cryptocurrency into the Aave protocol and earn interest on it, or they can borrow cryptocurrency from the protocol by providing collateral.

Aave uses a dynamic collateralization system, meaning that the amount of collateral required to borrow a certain amount of cryptocurrency can vary depending on market conditions.

Key Features of Aave

1. Multiple asset support: Aave supports the lending and borrowing of a variety of cryptocurrency assets, including popular ones like ETH and DAI, as well as less well-known ones like USDC, COMP, and SNX.
2. Flash loans: Aave allows users to take out short-term loans that must be repaid within the same transaction. This feature can be used for arbitrage, liquidity provision, and other purposes.
3. Stablecoin support: Aave supports the use of stablecoins as collateral, which can provide a more stable lending and borrowing experience for users.
4. Customizable liquidity pools: Aave allows users to create their own liquidity pools and set their own terms for lending and borrowing within those pools.
5. Governance: Aave is a decentralized platform governed by its users through a voting system. Users can vote on proposals to change the platform’s parameters or add new features.
6. Compound interest: Aave allows users to earn compound interest on their deposited assets by opting into the “Variable Interest Rate” option.
7. Platform insurance: Aave provides platform insurance to protect users against certain types of risks, such as smart contract vulnerabilities or operational errors.

3. PancakeSwap (CAKE): Top BSC-based DEX

Pancakeswap is a blockchain-based decentralized exchange (DEX) based on the Binance Smart Chain (BSC). It enables users to buy and sell tokens utilizing a liquidity pool concept. This means they may trade straight from the liquidity pool without needing an order book.

When opposed to conventional controlled exchanges, this allows for faster and cheaper deals.

Pancakeswap was founded in September 2020 and immediately rose to prominence owing to its low costs, quick transaction speeds, and user-friendly design.

It is one of the largest DEXs on BSC and a major player in the decentralized finance (DeFi) ecosystem.

Key Features of PancakeSwap

1. Pancakeswap is a decentralized exchange that operates on the Binance Smart Chain blockchain.
2. It does not have a central authority and instead uses smart contracts for trades.
3. It has a liquidity pool model, which allows users to trade directly from the pool instead of using an order book. This makes trading faster and cheaper.
4. Users can earn rewards by providing liquidity to the pool or participating in farming opportunities.
5. Pancakeswap also has a marketplace for unique digital assets called non-fungible tokens (NFTs).
6. It has a user-friendly interface and low fees compared to many centralized exchanges.
7. It also supports faster transaction speed.

4. MakerDAO (MKR): Best Defi platform for borrowing DAI Stablecoin

MakerDAO is a decentralized finance network that allows users to borrow stablecoins, which are digital assets tied to the value of a certain asset such as the US dollar.

The Ethereum network enables these loans, which are issued in the form of Dai stablecoins.

MakerDAO has a decentralized governance model, where users own and govern the platform by voting on system modifications through a voting process.

The governance of MakerDAO is supported by the use of MKR, a governance token used for voting on proposals and changes to the platform.

Key Features of Maker (MKR)

1. MakerDAO allows users to take out loans in the form of stablecoins
2. The stablecoin used on MakerDAO is called Dai
3. Users can vote on changes to the platform through a voting process using a governance token called MKR
4. Users can borrow Dai by putting up assets such as Ethereum or other cryptocurrencies as collateral
5. The value of the collateral must remain above a certain threshold or the user may be required to add more collateral or repay the loan
6. MakerDAO includes the Dai Credit System to manage the supply of Dai and ensure its value remains stable
7. MakerDAO’s code is publicly available and can be audited and reviewed by anyone.

5. Lido finance (LDO): Best Defi liquid staking solution for Ethereum

Lido DAO, also known as Lido Finance, is a decentralized autonomous organization (DAO) that intends to provide an Ethereum liquid staking solution. It enables users to earn rewards in a safe and decentralized manner by staking their Ether (ETH).

Lido DAO employs a proprietary protocol known as the Lido Staking Protocol, which combines on-chain and off-chain components to deliver a highly secure and fast staking solution.

The protocol manages staked ETH using smart contracts on the Ethereum blockchain, as well as off-chain infrastructure to give liquidity to stakers.

Key Features of Lido DAO (LDO)

1. Liquid staking: Lido DAO enables users to receive rewards on staked ETH while retaining liquidity. This implies that users can withdraw their ETH at any moment.
2. It offers a staking dashboard that allows users to track their staked ETH and payouts.
3. Lido DAO features a governance structure that allows users to participate in the DAO’s decision-making process.
4. Security: It provides a highly secure staking solution by combining on-chain and off-chain components.
5. Efficient: The DAO protocol is meant to be efficient, lowering staking fees and gas expenses.
6. Lido DAO is community-driven, with users able to contribute to the DAO’s growth and direction.

6. Curve DAO Token (CRV): Top DEX for Stablecoins Liquidity

Curve DAO Token (CRV) is a decentralized autonomous organization (DAO) and governance token for the Curve protocol, a decentralized exchange (DEX) focused on stablecoin trading. It was launched in January 2021 and has since gained significant popularity among cryptocurrency traders and investors.

CRV is built on the Ethereum blockchain and is fully transparent and auditable. It has a fixed total supply of 25 million tokens, with a portion being distributed through a liquidity mining program. Other portions are reserved for future development and growth.

CRV has seen significant price appreciation since its launch, with its market capitalization reaching over $1 billion at its peak. It has also been listed on several major cryptocurrency exchanges, making it easily accessible for traders and investors.

Key Features of Curve DAO Token (CRV)

1. Governance: Curve DAO’s decentralized decision-making mechanism lets users propose, vote on, and execute governance choices. This guarantees that the platform’s governance is decentralized and transparent.
2. The Curve DAO allows users to offer liquidity to the platform in return for a portion of the platform’s fees. This encourages customers to offer liquidity and contributes to the platform’s stability.
3. Tokenomics: The Curve DAO employs a novel tokenomics approach that compensates users for providing liquidity and engaging in governance. This helps to match user incentives with the platform’s long-term performance.
4. Security: To safeguard the safety of user funds, the Curve DAO employs a variety of security measures, including multi-sig wallets and an insurance fund to defend against losses caused by smart contract flaws.
5. Integration with other protocols: The Curve DAO is compatible with a number of other decentralized protocols, including Uniswap and Balancer, giving users access to a diverse set of liquidity pools and trading alternatives.

7. Balancer (BAL): Best Defi Yield Farming & AMM

Balancer is a platform that lets you trade digital assets like cryptocurrencies and tokens in a secure and transparent way.

It uses smart contracts and the Ethereum blockchain to make sure everything runs smoothly and is based on a special algorithm that keeps the values of the assets in the pool stable.

Balancer allows you to trade multiple assets at once within a single pool, making it easy for you to diversify your portfolio.

Key Features of Balancer (BAL)

1. Automated rebalancing: Balancer’s proprietary algorithm helps to maintain a constant balance between the assets in a pool, ensuring that their values remain stable over time. This can help to reduce risk and optimize portfolio performance.
2. Liquidity provision: Users can earn fees by providing liquidity to a pool, which helps to ensure that there is always a sufficient supply of assets available for trading.
3. Fee management: Balancer allows users to customize the fees they charge for providing liquidity to a pool, giving them control over their earnings.
4. Governance: Balancer has a native token, BAL, which is used to govern the protocol and access certain features. BAL holders can participate in decision-making processes related to the protocol, such as voting on changes to the Balancer smart contract or adding new pools to the platform.
5. Security: Balancer utilizes smart contracts and other security measures to ensure the safety and security of users’ assets.

What is Defi?

Decentralized finance (DeFi) refers to a financial system that uses a decentralized network, such as a blockchain.

It enables peer-to-peer financial transactions to take place without the need for middlemen like banks or other financial organizations.

DeFi encompasses several applications and protocols, including as lending and borrowing platforms, decentralized exchanges, stablecoins, and prediction markets.

These apps and protocols are frequently built on top of blockchain networks like Ethereum and employ smart contracts to automate financial transactions.

When compared to existing financial systems, DeFi has the potential to transform the financial industry by providing more accessibility, transparency, and security.

It also enables the development of new financial instruments and models that would otherwise be impossible inside the old financial system.

Pros and Cons of Investing in DeFi Tokens

types of DeFi tokens

There are several types of DeFi tokens, including:

1. Governance Tokens: These tokens allow holders to participate in the decision-making process for the platform’s future development.
2. Utility Tokens: These tokens are used to pay for services and transactions on the platform.
3. Staking Tokens: These tokens are used to participate in the platform’s consensus mechanism and earn rewards for contributing to the network.
4. Stablecoins: These tokens are designed to maintain a stable value and are often pegged to a fiat currency or a commodity like gold.
5. Security Tokens: These tokens represent ownership in real-world assets like stocks, bonds, and real estate.
6. Derivative Tokens: These tokens derive their value from underlying assets, such as commodities, stocks, or cryptocurrencies.

How to Decide the best Defi Tokens to Invest

There are several factors to consider when deciding which DeFi tokens to invest in:

🔍 1. Project fundamentals: Look at the underlying project’s whitepaper, team, roadmap, and other key fundamentals. Consider factors such as the project’s goals, use cases, potential for growth, and the expertise of the team behind it.

💰 2. Market demand: Check if there is a growing demand for the project’s products and services. Look at user adoption, trading volume, and the overall sentiment towards the project within the community.

🚀 3. Potential for growth: Consider the potential for growth of the project, including its scalability and ability to solve real-world problems. Look at its partnerships and collaborations, as well as any upcoming developments or announcements.

📈 4. Technical analysis: Analyze the project’s technical indicators, such as market capitalization, price trends, and trading volume. Look at the token’s price history and any patterns that may indicate future price movements.

👥 5. Community support: Evaluate the level of support and engagement from the community surrounding the project. Look at the number of active users, the level of social media engagement, and the overall sentiment towards the project.

💸 6. Tokenomics: Examine the tokenomics of the project, including its supply, distribution, and how the tokens are used within the ecosystem. Consider factors such as token utility and potential for token price appreciation.

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There are a number of cryptocurrency exchanges where you can buy DeFi tokens. Some popular exchanges include:

• Binance
• Coinbase
• Kraken
• Bitfinex
• Bittrex

Before buying DeFi tokens, it’s important to do your own research and carefully compare the fees, security measures, and liquidity of different exchanges. It’s also a good idea to compare prices across multiple exchanges to find the best deal.

Conclusion

In conclusion, the decentralized finance (DeFi) space is rapidly evolving and there are many exciting projects to consider for investment in 2023. Some of the top DeFi tokens to keep an eye on include AAVE, UNI, LDO, and CRV. These projects have strong communities, innovative use cases, and solid track records of growth.

However, it’s important to do your own research and due diligence before making any investment decisions, as the cryptocurrency market can be volatile and risks are always present.

Additionally, be sure to diversify your portfolio and only invest what you can afford to lose. With these considerations in mind, DeFi tokens can be a promising addition to your investment portfolio in the coming year.

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