The price of DeFi tokens is disappointing, but the actual benefit of the sector is the lending and liquid staking choices, not the price of worthless governance tokens.
Since whipping up a frenzy in the summer of 2020 through the first quarter of 2021, the decentralised finance (DeFi) sector has been in the backseat. Investors are now arguing whether the crypto sector is in a bull or bear market, so now is a good time to check in on DeFi and see which protocols are setting new trends.
Here’s a look at the top-ranking DeFi protocols, as well as a look at the tactics that these protocols’ users employ.
Curve is still the go-to protocol for staking stablecoins. Stablecoin-related DeFi protocols are the cornerstone of the DeFi ecosystem, and Curve is still the go-to protocol for staking stablecoins.
Four of the top five protocols in terms of total value locked (TVL) are linked to the development and management of stablecoins, according to Defi Llama data.
It’s worth noting that, while these protocols have dominated in terms of TVL, the value of their native tokens has fallen dramatically since their all-time highs in 2021.
The important lesson is that using the stablecoin portion of the DeFi market through staking and farming has provided consistent returns while also earning governance tokens for these platforms as a bonus to help mitigate token value drops.
Stablecoins currently play an important role in DeFi’s general health, which is growing as emerging protocols like Frax Share and Neutrino climb the TVL ranks amidst the growing number of interconnected blockchain networks.
DeFi’s value proposition is around lending and borrowing.
Lending platforms are another important part of the DeFi ecosystem, and one of the most important aspects that investors may use even in a bear market. AAVE and Compound are the current market leaders, with TVLs of $12.09 billion and $6.65 billion, respectively.
AAVE and Compound, like other stablecoin systems, saw their native tokens’ value peak in 2021, and both have been on a sustained slump for months.
The cross-chain integration of Polygon and Avalanche, which boosted the amount of supported assets and let users to avoid the high gas prices on the Ethereum network, helped AAVE’s TVL growth overtake Compound.
Long-term crypto investors who are wary of taking risks can gain from merely lending their tokens for a small profit.
DeFi gains more utility with liquid staking.
Liquid staking’s growing popularity is giving decentralised finance a new dimension. Liquid staking methods such as Lido Finance, which began as an Ethereum staking solution but has subsequently added Terra (LUNA), Solana (SOL), Kusama (KSM), and Polygon to its list of supported coins (MATIC).
The TVL on Lido reached a new all-time high of $14.96 billion on March 10 according to data from Defi Llama, as the protocol continues to draw additional value through the addition of new assets.
Users can stake Ether and Solana on Lido to earn stETH or stSOL, which can subsequently be used as collateral to borrow stablecoins from AAVE. Those assets can then be traded or used for yield farming, resulting in a higher overall yield from the initial staked item.
StakeWise, an Eth2 staking provider, the Cosmos-based pStake protocol, and Stader Labs are among the other noteworthy liquid staking protocols.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.
