Decentralized finance has led the charge in the “altcoin cycle” of cryptocurrency rallying. The rapid growth is both in utility--seeing a 90 day growth of 1B to 5.35B in assets being handled by decentralized finance protocols--as well as overall market growth, sending BTC dominance from 68% to 58% in those same 90 days.
We’re reaching new levels of risk taking, shown clearly by the rise and fall of YAM--a protocol that garnished 500M of assets managed and a price of 170 USD per token, down to 0.97 USD all in 3 days--all because of a bug in unaudited code that failed to dissuade investors.
The fear and greed index has thrown us into “Extreme Greed”, reaching highs not seen since June, 2019.
Gas prices have reached unsustainable highs of 50 USD per transaction, both showing the reliance and value Defi has on ETH, as well as challenges of being on “one world computer” in terms of scaling and on-chain processing. In the words of Elastos:
“Elastos is not a world computer but rather a network of distributed world computers. The Elastos blockchain distinguishes itself from other projects in the space by simply refusing to take on the identity of a world computer. Rather, it is a global network of distributed world computers.” -Source
Chainlink, the 5th largest cryptocurrency by market cap and the 8th biggest spender of ETH in terms of Gas Fees, spent half a million USD on Gas fees in the last 30 days; they are seeking alternative solutions, and they have been working with integration of Elastos ETH Sidechain Technology through Vulcan.link. As an oracle solution for price data, latency of any sort is unacceptable.
Defi projects across the board continue to draw FOMO, with 30 day gains of 450% for protocols such as BAND and NEST.
Common sense would put wise men in the sell-side phase of this current cycle, and a correction would not only be expected, but healthy at this time--but how much further can this “Extreme Greed” take us?
In crypto, the answer is always, “More than you would ever expect”. Irrational risk taking is in the blood of crypto investors.
It is my belief that we will continue to see growth flow into Defi, however, it will begin to move from the mere stablecoin, yield-farming, and loan issuance protocols into projects that solve the Gas crisis and scaling issues, or are addressing new areas of Defi.
Here is a small list of yet-to-be-discovered Defi projects that offer solutions to the current Gas crisis; all these projects have unique working products and proven teams.
Please note: do your own research. This is not meant to be investment advice, and the current market excitement is certainly in a high risk phase.
Switcheo-- Current MC: 37M
Switcheo was the first cross-chain fully decentralized exchange with stablecoin, NEO, EOS, and ETH pairs (including WBTC).
As with all exchanges, low volume is the biggest challenge despite having a sleek UI and reliable performance with immediate settlement on orders. With more than two years of proven innovation, they have outperformed nearly all other Defi projects with gains of 1300% in 90 days--and yet they remain one of the most undervalued Defi protocols by market cap.
So why the hype?
Switcheo announced the launch of a set of new products, with a first public release set for the 18th of August, 2020. These products are known as Tradehub and Demex.
Tradehub and Demex have plans to be the lambo of the true DEX world, offering all the functionality and reliability of a centralized exchange without compromising any personal security. Funds always remain in the user’s full control, and Switcheo refuses any KYC.
Tradehub and Demex offers advanced orders, derivatives and margin trading up to 100x, staking in liquidity pools (with 70-150% APY), stablecoin issuance, permissionless listings, no KYC, 10,000TPS, easy swapping like Uniswap and Kyber, amongst several other never-before-seen DEX offerings.
Tradehub will rely on Cosmo’s Tendermint SDK, and will use rollups for nearly 0 to actually 0 network fees. Cross chain expansion in supporting Zilliqa will come with native BTC deposits and BTC cross-chain trading pairs.
In other words, Switcheo Tradehub and Demex will have almost all the functionality of multiple Defi projects, with regular launches of these products starting within the week and progressing quickly into the rest of Q3-4.
Summary: It is my opinion that Switcheo offers the largest upside potential of any current Defi project, with a reliable and innovative team that has my complete trust. Though they are known for their association with NEO and are expected to be the Defi project of NEO’s ecosystem, their trading volume puts them heaviest in Ethereum’s Defi space. The future offerings of Switcheo’s Tradehub and Demex make it entirely unique, blowing any CEX or DEX competition out of the water.
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Vite--Current MC: 15M, VX MC: 3.7M
Vite is a DAG ledger platform that specializes in solving the scaling issues with their asynchronous architecture while resolving security concerns with a snapshot chain. They possess one of the fastest developer teams I’ve ever seen, and it makes sense that the name “Vite” means fast. Everything about Vite is fast.
Vite offers 0 transaction fees and near-instant confirmations, running off of “quota” which is an in-wallet PoW system. In other words, for every transaction, you offer your home computing power for a few seconds in-wallet, and that’s the only cost you take on for transactions.
Vite offers generous mining and staking rewards, and cross-chain asset management.
Besides their platform itself, they offer a cross-chain DEX called VITEX that offers dividends to VX holders, and uses a mostly-permissionless listing system in which the listing pair creator burns VITE tokens, sets trading fees, and receives a portion of all trading fees of that pair. They can also buy/sell/trade ownership of a listing pair; essentially, ownership of a trading pair is a digital asset in itself!
They already offer BTC/ETH/Stablecoin/Vite pairs to various altcoins, with trading fees in the .15% range. As mentioned before, trading volume is the biggest issue with any new exchange. To incentivize traders, they have an 8 year release schedule of VX rewards for makers and takers on the most popular pairs.
Staking VX offers dividend rewards, and these dividends are extremely generous based on current exchange volume. VX tokens that are locked up with a 7-day release period will receive a portion of trading fees. A small example is that about 5000 VX tokens, purchased at around 1500 USD at current market price, will result in around 2 USD worth of BTC/ETH/USDT paid DAILY. With a circulating supply of only around 10M, based on the 8 year release schedule of the total 30M tokens, that puts the VX MC at a measly 3M.
And finally, for upcoming developments, they will be offering a stablecoin to stablecoin conversion, for free. If you trade frequently, you'll know that the situation where getting USDT to USDC, for instance, and paying slippage, fees, Gas, etc because there isn't a trading paid for that stablecoin, can be extremely frustrating. They are also adding the ability to, "deploy trading strategies (arbitrages between pairs, for instance) after ViteX gets integrated with open source projects that implement said strategies." -Richard, COO and Vite Co-founder speaking about the roadmap.
Summary: I believe Vite’s biggest challenge to be exchange volume, but the generous rewards for holding VX make it only a matter of time before ViteX is discovered, with a massive upside potential difficult to find in the current Defi space.
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Loopring--Current MC: 200M
Loopring is the first DEX to implement zkrollups to combat slow transactions and high fees. ZK lends to Loopring’s strong values in privacy and decentralization, and while it isn’t a small cap (as it has been promoted strongly by Vitalik himself and has similar volume as Switcheo), it’s essentially free trading, strong association with Ethereum, and rapid development makes it a safer bet than most DEXs.
Loopring’s unique offering is that it’s a plug-and-play protocol that other DEXs can adopt, and its engine allows for order sharing to improve liquidity across any DEX that adopts Loopring’s protocols.
Loopring offers staking, which puts 70% of trading fees into a pool, and they’ve recently launched liquidity mining. I’ve been following Loopring for about 3 years, similar to both Vite and Switcheo, and their development progress is similarly aggressive with frequent rewards and promotions for early adopters.
As the “most scalable DEX on Ethereum” with Loopring 3.0 offering 2000-16000 trades per second, and widely available on both on DEXs and CEXs, Loopring has positioned itself well for steady growth. While it makes the “undiscovered” list here, in my opinion it has achieved “household name” status for most in Defi and Ethereum, and thus, it is only a matter of time.
Summary: Exchange volume is the make or break challenge of any exchange, be it centralized or decentralized, but the network effect/snowball effect can happen fast. Loopring is very well positioned because of the wide awareness it holds due to direct endorsements from Vitalik B, the creator of Ethereum. Thus, it stands to logic that there is a great chance it will be the first DEX people think about when they are looking for a non-custodial solution with low fees and fast throughput.
Ren--Current MC: 250M
This is another middle cap token that I consider still “undiscovered”. While this may be debatable, the fact that REN can create a trustless custodian for nearly any token makes REN still significantly undervalued. Essentially, one of the biggest problems Defi has is the ability to interact cross chain from a single platform in a trustless manner. This is one of the biggest reasons people continue to use centralized solutions.
REN allows trustless cross chain interoperability for Defi, and thus it will be preferentially used in almost all Defi offerings. In comparison, a centralized custodial solution WBTC has locked up 250M USD, up from 40M in June. REN has locked up 70M USD, up from 7M in June.
REN can currently support BCH and ZCash (ZEC) as well as BTC. It offers rewards to “darknodes” who help secure their network, paid in Darknodes in BTC, ETH, ZEC, DAI, and ERC-20. Darknodes require 100k REN, but as the network grows and its offerings, so will the darknode rewards.
Summary: Ren fills a significant need between Defi and centralized financial institutions. In terms of price stability, any retracement has been quickly filled and community faith in REN is on par with a cultish fanaticism with V-shaped rebounds everywhere.
WeOwn--Current MC 3M
WeOwn, once Chainium, is taking a different approach to Defi. While most projects are focused on lending and borrowing alone, WeOwn is focused on SMEs with peer-to-peer lending and equity financing. They deal with issuance of security tokens (Loans - Equity (Shares)/Debt raises (Notes - Loans).
WeOwn targets businesses that are interested in STOs, with tools for shareholder management and tokenization. They offer Software as a Service to companies, and they’ve a working product and have recently announced a partnership with Moneycorp and Mason Privatbank.
They are on their own chain, and they plan on adding a DEX called WeExchange which will be a fully decentralized Stock Exchange. They'll have crypto to crypto lending, shareholder voting/registry/p2p trading.
Summary: I consider WeOwn to be second wave Defi, building in an area that most other Defi Platforms haven’t considered yet. When investors begin searching for other types of Defi use-cases, they will surely come across STOs--the shareholder and investor management side of business Defi--and the potential excitement makes OWN with it’s miniscule MC a “diamond in the rough”.
Tellor--Current MC: 70M
Whereas Chainlink has risen to astronomical heights and is seen as an unstoppable force in Defi as the de facto Oracle solution, Tellor has branded itself as the decentralized Oracle solution. The common comparison is, “Chainlink, but decentralized.” BAND protocol is a very similar project, with a similar goal, however its MC is 270M, which makes me include Tellor as the “undiscovered” Defi project for this article.
But what is an Oracle? Essentially, data has to trusted for Defi to work, and where you get that data matters. Manipulation especially in crypto, is a major hurdle, and Oracle data has a lot to do with the ability to manipulate the markets. Getting off chain data from reliable parties presents an interesting challenge, especially in terms of speed, security, as well as accuracy. You can read more about the problem it solves, here:
When it comes to future success, Oracles can only be successful if they are adopted. This is why Chainlink, though more centralized, is such a dominant force. Tellor, however, has grabbed some significant investors that make it a monster in the making: Binance, MakerDao, and ConsenSys, amongst others.
Tellor has gone ballistic in terms of price appreciation, growing from 7M to 70M MC in 90 days, but given that Chainlink is 2.5B in MC, 35x Tellor’s MC, and 1/3rd BAND’s MC, how much growth is still possible?
Summary: As with DEX plays, and honestly all Defi plays, hype and investor excitement leads to use and adoption, which leads to value. It’s a chicken-egg situation, however, Tellor is definitely on the uptrend in a way that may not end for some time given favorable global market conditions.
Reminder: Investing in cryptocurrency is highly risky. Black swan events and global markets impact cryptocurrency far more than traditional markets where are also in bubble territory. Take risks only as you are prepared.