2020’s DeFi craze: The best, worst and fishiest projects in crypto

As 2020 comes to a close, it’s a good time to reflect on the biggest crypto developments and the wild ride the sector took investors on.

At the beginning of the year, Bitcoin (BTC) was hovering just above $7,000, and the top-ranked digital asset had started to gather steam as the block reward halving approached. Then came the coronavirus pandemic and a sharp correction in the global stock markets that triggered the infamous Black Thursday Bitcoin crash, which saw the price of BTC plummet to $3,782 on March 12.

While things looked gloomy for Bitcoin and the greater global financial ecosystem, the decentralized finance sector was just beginning to heat up.

An emerging wave of DeFi protocols took previously glitchy and hard-to-navigate decentralized apps and exchanges, such as EtherDelta, and transformed them into high-volume, high-yield unicorns that provided investors with consistently high returns on a regular basis. In terms of total value locked (the value of the assets committed to the protocol), transaction volume and market capitalization, many DeFi platforms and their associated tokens now rival the top centralized exchanges.

In 2020, the decentralized ethos of cryptocurrency truly established itself, and decentralized, peer-to-peer trading within smart contracts has evolved to the extent that a new ecosystem of unique passive income-generating projects can be easily accessed by any investor with a MetaMask wallet and a few dollars worth of BTC, Ether (ETH) or Tether (USDT).

In addition to earning high returns on DeFi tokens, investors were also able to engage in a new form of staking that entails offering one’s assets as collateral to small crypto and blockchain startups in return for newly minted tokens. Usually, the tokens would immediately gain considerable value and provide yield to the stakers, or farmers. This phenomenon of “yield farming” got started with the release of Compound’s COMP in June.

The yield farming trend symbolized the radical nature of the DeFi space. Some projects were clearly designed to fatten the wallets of their creators by taking advantage of the FOMO and naiveté that is characteristic of many new investors in emerging markets like crypto. For example, a common farming mechanism requires users to buy a number of existing tokens before obtaining yield. Due to the immense inflation pressure early on, yield farmers often dominate the token’s price action and are themselves the source of the yield they are chasing.

Yet, a number of top-notch DeFi projects emerged and gained prominence thanks to yield farming. To date, they continue to grow their communities and offer revolutionary new financial concepts that could change the face of crypto and traditional finance.

Uniswap: One DEX to rule them all

It can be argued that of all the projects that gained prominence in 2020, Uniswap was one of the foundational players in catalyzing the DeFi boom. The platform provided a new ecosystem…