The collapse of FTX exchange in late 2022 has spurred all sorts of crypto users to pull their funds off centralized crypto exchanges just in case something similar occurs with them.
This means that many cryptocurrency holders are now using decentralized exchanges and lending platforms rather than centralized ones. Whether they’re just looking to make swaps, earn a high rate of return, or borrow funds, decentralized finance (DeFi) platforms can provide all the same services as centralized ones. However, with the variety of platforms on the market, it can be hard to choose a DeFi platform that will serve your needs.
In this guide we’ll discuss the best and simplest DeFi platforms across a variety of blockchain networks. Let’s start by defining DeFi.
What is DeFi?
Decentralized Finance, or DeFi, is one of the biggest draws in cryptocurrency. DeFi covers a variety of decentralized applications (dApps) including financial services such as decentralized cryptocurrency exchanges (DEXs), lending platforms, yield aggregators, and automated market makers (AMMs). All these types of dApps provide users with opportunities to use their crypto to generate a high rate of return, which is their main draw. This can be done through providing liquidity to a DEX/AMM, providing liquidity to a lending platform, or using a yield aggregator.
DEXs and AMMs are pretty much the same type of platform. They are both publicly funded platforms that users can use to swap their cryptocurrencies. What makes them publicly funded is that the platform’s liquidity is provided by its users, rather than a centralized authority. This means rather than the centralized authority, such as a crypto exchange, collecting trading fees and/or commissions, the users who provide liquidity do instead. Depending on the DeFi platform and the position of the user, it can be extremely worthwhile and potentially profitable.
Are All DeFi Platforms Available on Every Blockchain?
While there are some DeFi platforms that are available on multiple blockchain networks, generally speaking they’re confined to just one.
Sometimes, as the popularity of a DeFi platform increases, they expand the platform to other networks, such as AAVE starting on Ethereum, but later adding support for Polygon (MATIC), Avalanche (AVAX), and Fantom (FTM) networks, among others.
Simplest DeFi Platforms and Supported Networks
Below we’ve outlined some of the simplest, but also most popular DeFi platforms, along with the blockchain networks that they operate on. For each platform, we’ll also mention the services available, and the total value locked into the platform.
There are certainly far more DeFi platforms on the market than the ones mentioned here, these are mainly the top platforms by total value locked, meaning the value of the assets that users have provided to the platform’s liquidity.
Uniswap
Networks: Ethereum, Arbitrum, Polygon, Optimism, Celo
Services: Decentralized exchange and liquidity pools
Total Value Locked (TVL): $4 billion
Uniswap is one of the first and most popular DEXs on the market, and is perhaps considered to be a pioneer platform for the DeFi sector. Many of the other platforms on this list are essentially just copies of Uniswap released on other blockchain networks. Uniswap allows you to swap between any of the assets that exist in the liquidity pools. Those that choose to provide liquidity to those pools can earn a rate of return that is proportionate to their provided liquidity and trading volume within the pool.
PancakeSwap
Networks: Binance Smart Chain (BSC), Aptos, Ethereum
Services: Decentralized exchange, liquidity pools, staking pools, lottery, and more
Total Value Locked (TVL): $2 billion
PancakeSwap is essentially a copy of Uniswap that was launched on the Binance Smart Chain, though it has added support for Ethereum now as well. Though its original release was just for swapping and providing liquidity, PancakeSwap has been an innovative platform. They offer staking farms for new assets and their native CAKE token, along with liquidity pools, as options to earn. They also have lotteries and price prediction games.
SushiSwap
Networks: 18 including Ethereum, Arbitrum, Polygon, BSC, Fantom, Avalanche, and Harmony
Services: Decentralized exchange and liquidity pools
Total Value Locked (TVL): $600 million
SushiSwap is the most notorious copy of Uniswap, having launched after it on Ethereum with essentially no difference, but with incentives that initially caused many Uniswap users to bring their liquidity to Sushi. Since that time, it has lost some popularity on Ethereum, but it’s now accessible from 18 different networks, making it a utilitarian choice for users who have a variety of crypto assets across differing blockchains.
Balancer
Networks: Ethereum, Polygon, Arbitrum
Services: Liquidity pools and decentralized exchange
Total Value Locked (TVL): $1 billion
Balancer is a liquidity pool platform with a decentralized exchange as well. It works as a self-balancing portfolio. Users can create their own custom liquidity pool, or provide liquidity to any of the pools across the three supported blockchain networks.
AAVE
Networks: Avalanche, Optimism, Ethereum, Polygon, Fantom, Harmony, Arbitrum
Services: Crypto lending and borrowing
Total Value Locked (TVL): $4 billion
AAVE is one of the original crypto lending and borrowing platforms. It initially launched on Ethereum, but has expanded to many other networks. AAVE allows users to provide assets for other users to borrow, in exchange for an APR that is based on supply and demand. Users who supply assets also have the option to borrow against their supplied holdings in an effort to speculatively invest. You can also stake AAVE on the platform for a return on the Ethereum network.
Lido
Networks: Ethereum, Solana, Moonbeam (Polkadot), Moonriver (Kusama)
Services: Liquid staking
Total Value Locked (TVL): $8 billion
Lido is a liquid staking platform that first launched when Ethereum staking for ETH 2.0 first became available way back in December 2020. They’ve since expanded their platform to other blockchain networks. Users of Lido can stake a variety of digital assets for a return, with Lido taking a commission in exchange for providing you with the infrastructure. Liquid staking means that you can still access and use your assets while they are staked. Your returns are simply prorated based on your stake over a period of time.
Curve
Networks: Ethereum, Optimism, Arbitrum, Polygon, Fantom, Celo, Avalanche, Moonbeam, Gnosis, Kava, Aurora, and Harmony
Services: Decentralized exchange and liquidity pools for stablecoins
Total Value Locked (TVL): $5 billion
Curve is the main source for stablecoin swaps. This means that the majority of the liquidity pools on the platform are made up of assets like USDT, USDC, and DAI, though there are also pools that involve other crypto tokens. Users can provide liquidity to the pools in order to earn a return, but the platform is best used as a stablecoin exchange. It’s perhaps the most efficient way to swap one stablecoin for another without losing much value in the exchange.
MakerDAO
Networks: Ethereum
Services: Lending and borrowing, DAI-stablecoin issuing platform.
Total Value Locked (TVL): $7 billion
MakerDAO is another one of the original lending and borrowing platforms on the market. It launched on Ethereum and it remains the only network it operates on. Users of MakerDAO can provide assets in order to mint DAI, a stablecoin with a value of $1 USD. Users must stay overcollateralized in order to do this, meaning they generally have to maintain a ratio of well over 100% due to the volatility of crypto. Users can then borrow DAI which they can use to speculate on another crypto asset or hold.
JustLend
Networks: Tron
Services: Lending and borrowing
Total Value Locked (TVL): $3 billion
JustLend is a lending and borrowing platform built on Tron (TRX). It works much like AAVE and MakerDAO, meaning users can provide assets for a return that’s based on supply and demand, while also being able to borrow against those provided assets.
Convex Finance
Networks: Ethereum, Arbitrum
Services: Yield aggregator
Total Value Locked (TVL): $4 billion
Convex Finance is a yield aggregator that utilizes Curve. Essentially, Convex pools users’ funds into liquidity pools that are then deposited on Curve. Because the pool created on Convex amongst a variety of users is a large position, it earns more rewards than any user that provides liquidity individually, barring their position being larger than the one created by Convex. Users are then distributed their Curve rewards through Convex. Yield aggregators are one of the more complex DeFi platforms you can use.
Is There Any Risk to DeFi?
Yes, there is certainly a risk to participating in DeFi. Depending on the security of the platform and its smart contracts, there could be weaknesses in the code that allow hackers to expose vulnerabilities and affect users’ holdings. However, as long as you’re using a trusted platform such as Uniswap, there is likely little risk of a hack. Newer platforms and bridges tend to be the target for hackers because they frequently miss issues in their code during audits. Therefore it may be best to stay off a newly launched platform until it irons out any kinks.
Providing liquidity also exposes you to impermanent loss, which means that the amount of tokens you deposited into the pool may not be what you get back. This is due the nature of the assets within that pool changing in value compared to each other, as you always provide liquidity in equivalent dollar amounts.
Closing Thoughts
There are so many DeFi platforms on the market, many of which are thriving and providing users with decentralized ways in which to make swaps and earn returns.
Though many of them are similar to others, the original platforms such as Uniswap and AAVE are often your best choice for simple DeFi because of both the high volumes and solid interfaces. That said, you should research all the platforms available to you before making a decision on which to use.
