Five hot DeFi projects you can invest in

Customary disclaimer: this is not financial advice, if you choose to invest in these projects then you do it at your own risk. And always, always, DYOR. We are only pointing you in certain directions.

Thanks to the bear market, many DeFi projects are silently building products that will eventually see wide adoption in the upcoming years. But as always, investors ask: how to pick the right ones that are already showing promise? Our research desk has done due diligence to identify early favourites for 2023. Buckle up. 

1. Liquity

Tokens: LQTY, LUSD

Use case: Users can borrow the stablecoin LUSD interest-free against their Ethereum (ETH) holdings as collateral. They can thus obtain an ETH-backed loan without any recurring costs.

A ‘trove’ is where you take out and maintain your loan. Each trove is linked to an Ethereum address and each address can have just one Trove. From a low of 479 troves in June 2022, Liquity ended the year with 922 troves equal to $179 million worth LUSD.

Source: Twitter

Why Liquity: Instead of charging interests from borrowers, they have kept one-off borrowing fee that stands at 0.5% (can range from 0% (Recovery Mode) to 5%) under normal operations and a Liquidation Reserve equal to 200 LUSD. Given their rise in terms of adoption as well as TVL, Liquity is likely to become a popular lending platform.

Unlike Maker, where it is governed by MakerDAO community, Liquity is 100% algorithmically governed without any human involvement.

2. Lido Protocol

Token: LDO

Use case: Using Lido, users can stake their tokens and receive liquid tokens pegged 1:1 to the initial stake. Lido is fast becoming the de-facto staking solution for Ethereum (ETH).

Why Lido: The protocol earns 10% of the total Ethereum (ETH) staking rewards generated from user deposits, which implies that they earn 10% of the 15M ETH currently staked at APR of 5%.

Daily active users and LDO token holders are increasing.

Lido’s fee-based revenue moves in parallel with ETH Proof-of-stake (PoS) earnings.

The steady uptick in DAUs, revenue and new Shanghai update (expected this year) of Ethereum which will let participants un-stake are all key components for assessing growth and sustainability within this DeFi platform.

Lido’s performance:

Source: Tokenterminal

3. Rocket Pool

Token: RPL

Use case: Rocket Pool is an Ethereum 2.0 staking pool that allows a user to run a validator on Ethereum PoS (while Lido is a platform that lets you stake ETH).         

Every time a user stakes 16 or 32 ETH, they receive rETH token in return. Stakers can use rETH to perform any activities across DeFi. protocols.

Why RPL: Only 14% of ETH is staked, which is very low compared to 72% of ADA, 71% of Solana or 97% of BNB. So, there is a lot of room for Liquid Staking protocols like Rocket Pool to grow once more ETH gets staked in the network.

Source: Messari

Ethereum developers are targeting March 2023 for the activation of Shanghai and staked ETH withdrawals. This is expected to drive the rally for all the liquid staking providers.

According to Defiwars, rETH currently holds the maximum (101.03%) as peg of ratio, which implies how much ETH you could get, if you traded your rETH token.

4. GMX

Tokens: GMX, GLP

Use case: GMX is a decentralized spot and perpetual exchange that supports low swap fees and zero price impact trades. GLP is its liquidity provider token while GMX is its governance token (https://zerion.io/blog/what-is-gmx/).

Why GMX: The fees that GMX accrues are split 30% to GMX token holders and 70% to GLP holders. The current homepage for GMX estimates an annual percentage yield of 10% for GMX tokens and 20% for GLP tokens.

With more users flocking to DEXs after the FTX collapse, GMX has already seen sharp surges in the past few weeks.

Permissionless accessibility and leveraged trading offering bundled with rapid growth over a few months could attract institutional market as more big players start to experiment with DeFi.

Launch of Synthetics – a digital representation of derivatives – will likely boost the ecosystem as well.

GMX – Total Value Locked (TVL):

Source: Defillama

5. Yearn Finance

Token: YFI

Use case: Yearn.finance is an aggregator service for decentralized finance (DeFi) investors, using automation to allow them to maximize profits from yield farming.

Why Yearn.Finance: Recent launch of Permissionless Vault Factory – any user can build a vault, accrue yield with the help and assistance of separate investment methods. (Yearn Vault is a smart contract that collects investor’s liquidity, but from other platforms)

This could lead to increase in Yearn’s stock of veCRV tokens. Released on 9th Jan 2023, they already have 24 vaults with APY ranging from 0.34% – 161.49%. 

Their low token supply of 36,666 makes it more attractive.

YFI is trading near $6,100 – nearly 93% down from its all-time high in 2021. We believe that YFI’s bearish trend may continue further into 2023 – waiting for the right time to enter is crucial as an investor.

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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.