Decentralised Finance, commonly referred to as “DeFi,” is a growing phenomenon that enables financial transactions without any centralized intermediaries. DeFi startups are generally built on top of web3 technologies, which are decentralized peer-to-peer networks that operates on top of blockchain technology. These startups offer a wide range of financial products and services, including loans, trading, and asset management, all without the need for traditional banks or financial institutions.
As of September 2022, the amount of money currently locked in DeFi stands at around $100 billion, up from only $10.3 billion at the start of 2020.
Our Top 15 DeFi startups to watch out for in 2023 are Wrapped Bitcoin (WBTC), Avalanche (AVA), DAI, Uniswap, Chainlink, Tezos, Frax, Maker, DeFiChain, PancakeSwap, NexusMutual, 1Inch, Compound, IoTeX and Kyber Network.
1. Wrapped Bitcoin (WBTC)
With a current market capitalisation of £3.4 billion, Wrapped Bitcoin is the first ERC-20 token that is backed by Bitcoin. The token allows users to trade Bitcoin on the Ethereum blockchain, providing greater liquidity and interoperability between the two networks.
2. Avalanche (AVAX)
Avalanche is an open-source platform for building decentralized applications (dApps) and enterprise-grade blockchain solutions. The platform is designed to support high-throughput transactions and smart contract execution. Avalanche currently has a market capitalisation of £4.6 billion.
DAI is a decentralized stablecoin that is pegged to the US dollar. Unlike traditional stablecoins, DAI is not backed by a centralized entity, but rather by a basket of other digital assets held in a smart contract. This makes DAI more resistant to market volatility. DAI current market capitalisation is
MakerDAO launched Dai stablecoin in December 2017. MakerDAO was created in 2015 by Rune Christensen. DAI currently has a market capitalisation of £4.6 billion.
Uniswap was one of the first DeFi applications to gain significant traction on Etherum and it launched in November 2018. As of April 2021, Uniswap had processed over $10 billion in weekly trading volume. The platform allows users to trade a wide range of ERC-20 tokens without the need for order books or centralized intermediaries.
Uniswap is known to have pioneered the Automated Market Maker model, in which users supply Ethereum tokens to Uniswap “liquidity pools” and algorithms set market prices. This is as opposed to order books, which match bids and asks on a centralized exchange like Coinbase, based on supply and demand. Uniswap's current market capitalisation is £4 billion.
Chainlink is a decentralized oracle network that connects smart contracts to real-world data and events. The network provides secure, reliable, and tamper-proof access to external data sources. Since smart contracts require off-chain data in an on-chain format to build agreements. The challenge lies in linking outside information to blockchain smart contracts in a language both parties understand, which is where Chainlink comes in. The platform links off-chain and on-chain data through oracles that are software known as middleware. Chainlink's current market capitalisation is £3.1 billion.
Tezos is a self-amending blockchain that allows developers to create decentralized applications and smart contracts. The platform is known for its on-chain governance model, which allows token holders to vote on protocol upgrades and changes. The current market capitalisation of Tezos is £842 million.
Frax is a decentralized stablecoin that uses a hybrid algorithmic and collateralized approach to maintain its peg to the US dollar. The stablecoin is backed by a basket of other assets, including Ethereum, USDC, and USDT. Frax's current market capitalisation is £847 million. Frax protocol implements design principles of both the spectrums mentioned above to create a highly scalable, trustless, stable, and on-chain fund. The protocol is a two-token system encompassing Frax (FRAX), a stablecoin, and Frax Shares (FXS), which is a governance token.
Maker is a decentralized lending platform that enables users to borrow and lend cryptocurrency without the need for intermediaries. The platform uses a stablecoin called DAI as collateral for loans. The DAI stablecoin is a decentralized and collateral-backed pegged cryptocurrency. A pegged cryptocurrency is one whose exchange rate in relation to a traditional currency has been pre-determined by a national government. The Maker community thinks that a decentralized stablecoin is essential for any business or individual to achieve the benefits of digital currency. Currently, Maker has a market capitalisation of £530 million.
DeFiChain is a decentralized blockchain platform that is specifically designed for DeFi applications. The platform provides a full suite of decentralized financial products, including loans, swaps, staking, and more. The DeFiChain network aims to solve various problems in the current financial services. Today, almost every financial service is operated by banks. When it comes to investments, the issues with financial services are increasingly becoming evident to everyone: compounded costs due to mediators, slow transactions, delays for cross-border transactions, and inaccessibility to many sectors of the population. Its current market capitalisation is £316 million.
PancakeSwap is a decentralized exchange that operates on the Binance Smart Chain. The exchange offers lower transaction fees and faster confirmation times than Ethereum-based exchanges, making it more accessible for retail investors. The PancakeSwap platform aims to provide an opportunity for users to trade and earn crypto on the Binance Smart Chain within seconds. The three ways users can earn more from the crypto tokens on PancakeSwap are trading, earning, and winning. The platform is an automated market maker (AMM) that provides various features that power decentralised trading. Its current market capitalisation is £558 million.
11. Nexus Mutual
Nexus Mutual is an Ethereum-based platform which creates insurance products with community driven management and financials. Using the Ethereum blockchain, customers from anywhere in the world can pool together their risks without the need for an intermediary or broker.
Nexus Mutual's first product was Smart Contract Cover, which protects against smart contract vulnerabilities for smart contracts used on various decentralized finance (DeFi) platforms. Nexus plans to roll out more insurance products in the future.
1INCH is an Ethereum token that powers 1inch, a decentralized exchange that aims to offer the “best rates by discovering the most efficient swapping routes across all leading DEXes.” Decentralized exchanges (a.k.a. DEXes) like 1inch enable users to transact tokens without an intermediary. 1inch exchange allows users to compare and optimize their crypto trades and swaps without going through every exchange separately. 1Inch will be governed by a DAO (Decentralized Autonomous Organization) where users get voting rights based on holding the 1Inch token. 1inch recently raised $175M in their most recent series B funding round. Its current market capitalisation is £354 million.
Compound is an open-source algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications. At the point of writing this article, Compound had enabled circa $820 million of borrowing backed by circa $2.4 billion in collateral across four markets which are: V2 on Ethereum blockchain, USDC on Ethereum blockchain, USDC on Polygon blockchain and ETH on Ethereum blockchain. Users of Compound can earn interest ranging from 2%-8.5% by supplying crypto to the ecosystem. As one of the largest players in the space, Compound has been backed by large investors like Andreeson Horowitz, Coinbase, and Bain Capital. Its current market capitalisation is £262 million.
IoTeX is a decentralized blockchain network designed to connect Internet of Things devices and decentralized applications. IOTX can be used to pay for transactions, for staking and governance, and to register new devices on the IoTeX network. Today IoT devices are fast emerging and are expected to grow to 18 billion devices in 2022. The platform is powered by IOTX, an Ethereum token. IoTeX currently has a market capitalisation of approximately $213 million.
15. Kyber Network
Kyber Network is a DeFi protocol that allows users to efficiently swap and convert different digital assets and cryptocurrencies. One of its best features is that users can get paid in any token/cryptocurrency via their Kyber wallet. They are also able to convert that payment instantly into any cryptocurrency of their choice. The Kyber protocol aggregates liquidity from a wide range of reserves, powering instant and exchange in any decentralized application, meaning that the network doesn’t require any bank or other institution in the middle. The current market capitalisation of Kyber Network is approximately £93 million.
DeFi startups are at the forefront of the shift towards a more decentralized finance ecosystem. These 15 startups are paving the way for a new era of financial infrastructure, one that is transparent, inclusive, and accessible to all. As the DeFi space continues to evolve, we can expect to see more innovative solutions that will reshape the way we think about traditional finance.