DeFi has created a suite of highly demanded tokens within the larger cryptocurrency ecosystem. With DeFi tokens outperforming BTC in 2020, the ecosystem is quickly turning towards popular protocol tokens as a means of value capture for DeFi’s growth.
DeFi Token Trends for June of 2020
In recent weeks, DeFi tokens have been all the rage. Best highlighted by Compound and Balancer introducing liquidity mining, both protocols have leveraged the SAFG model to distribute tokens to users for value-added actions to their respective ecosystems. With Coinbase announcing support for COMP just a week after distribution, it’s clear that DeFi tokens have taken center stage.
Complimented by the surge of existing tokens like Maker‘s MKR, Kyber‘s KNC, and Aave‘s LEND, we’re seeing DeFi tokens enjoying renewed interest for a flurry of reasons. Whether it by new tokenomics upgrades like Katalyst or governance upgrades which have been teased by Aave, there’s no denying the DeFi market is really starting to hit its stride.
We’ve even seen new projects like Curve and pTokens exploring their own governance tokens, a trend we expect many others to follow in the coming year. Similarly, many are turning to DEXs like Uniswap as a means to first list their tokens, best exemplified by UMA and their Initial Uniswap Listing last month.
This list will be updated periodically. The tokens mentioned on this list are meant to serve as education and should not be treated as investment advice.
To see which DeFi tokens have the highest market cap at any given time, we recommend this awesome tool from DeFiMarketCap.
Compound – COMP
Total Supply: 10,000,000 COMP
As the native governance token behind the leading lending protocol, COMP is earned by users for lending or borrowing assets. COMP is used to govern important protocol decisions that can be voted or delegated on the Compound Governance Dashboard.
COMP is allocated to markets relative to the amount of interest accrued, meaning assets that generate the most interest will earn the most COMP per day. Here’s a great tool to keep up with which assets are earning the most COMP on any given day.
DeFi Rate is making a big push to be a Compound delegate, and you can read our bid about why you should consider delegating to us here.
Maker – MKR
Total Supply: 1,005,577 MKR
Maker is the decentralized lending protocol responsible for the creation of DAI. MKR is used to vote on protocol decisions through the Maker voting dashboard and is burned using a portion of Stability Fees collected from outstanding loans.
0x Protocol – ZRX
Total Supply: 1,000,000,000 ZRX
0x Protocol is a DEX liquidity protocol used to funnel liquidity to a number of different exchanges. ZRX is used to govern the protocol along with being staked by Market Makers as a means of collecting trading fees.
Kyber Newtork – KNC
Total Supply: 210,623,056 KNC
Kyber Network is a leading DEX that captures value through a native token – Kyber Network Crystals (KNC). Fees collected from the exchange are largely used to burn KNC. In the near future, Kyber will undergo it’s Katalyst tokenomics upgrade, introducing key governance mechanisms through the advent of the KyberDAO.
Using KNC, users will have the ability to vote (or delegate) on important protocol decisions including the distribution of fees collected from DEX trading.
Synthetix – SNX
Total Supply: 190,075,446
Synthetix is a leading derivatives protocol backed by a native token SNX. In order to mint new derivatives – called Synths – users must stake at least 750% of the Synths value in SNX. Maintaining this ratio – referred to as a cRatio – allows users to earn native inflation along with a pro-rata portion of trading fees from the Synthetix Exchange.
Aave – LEND
Total Supply: 1,299,999,942 LEND
Aave is a leading lending protocol that leverages a native token LEND to accrue value earned from protocol fees like borrowing and Flash Loans. Today, 80% of all fees are used to burn LEND. In the near future, LEND will become a governance token used to vote on protocol decisions and will act as a means of insurance to protect again any potential deficits.
UMA – UMA
Total Supply: 100,224,817 UMA
UMA is a derivatives protocol for the creation of permissionless synthetic assets. The native token – UMA – is used to govern protocol decisions and can be used to challenge underlying registries that are out of sync with the synthetic asset they are attached to.
Ren Protocol – REN
Total Supply: 999,999,633 REN
Ren Protocol is an interoperable bridge to port assets to Ethereum using the RenVM. To become a validator on the network, users must post 100,000 REN as collateral to host a darknode. Those which operate a darknode are entitled to a pro-rata share on all trading fees which are collected from the protocol.
Nexus Mutual – NXM
Total Supply: 4,355,684 NXM
Nexus Mutual issues mutual members NXM in exchange for ETH that is deposited to the Capital Pool to protect against smart contract vulnerabilities. In the event that a claim is passed, ETH from the capital pool is used to compensate the affected party. Members can stake NXM on various contracts to collect a portion of fees that are earned when covers are purchased. In the near future, Nexus will introduce pooled staking which allows all covers purchased to be allocated across all those that stake their NXM.
Bancor – BNT
Total Supply: 69,148,554 BNT
Bancor is a DEX which is fueled by a native token – BNT. A portion of trading fees collected from the exchange are distributed to BNT holders. Bancor will soon release a V2 upgrade which is set to further value accrual and introduce governance.
Numerai – NMR
Total Supply: 10,979,551
Numerai is an AI-based hedge fund responsible for the creation of Erasure – a prediction protocol in which users stake NMR to signal confidence in their predictions.
Balancer – BAL
Total Supply: 100,000,000 BAL
Balancer is an automated asset management and liquidity protocol governed by a native token – BAL. Since launch it’s Liquidity Mining program in June, Balancer has seen strong growth on all fronts. BAL is used to govern important protocol decisions like protocol fees, support assets, and Factors relative to how BAL is earned.
Loopring – LRC
Total Supply: 1,374,513,897 LRC
Loopring is a Layer 2 exchange protocol that offers scalability solutions to optimize throughput on Ethereum. LRC is staked to earn a portion of trading fees earned both on the DEX on on applications like Loopring Pay.
Note: This list will be updated periodically as new tokens are brought to our attention. If you would like to see your token mentioned on this list, please contact us with a breakdown on what your token is used for and why it should be listed.
Outside of protocol-specific tokens, we’ve seen the rise of various flavors that are given to a depositor for supplying assets to a DeFi protocol. Examples of these token flavors include:
- cTokens – ERC-20 tokens which represents an underlying loan being supplied out on Compound Finance. cTokens accrue interest over time based on the supply interest rate and therefore, each token becomes redeemable into an increasing amount of the underlying asset.
- dTokens – Dharma‘s token flavor which offers the same benefits as cTokens with 10% of collected interest being siphoned back to Dharma as a revenue stream.
- oTokens – oTokens are options offered on the Convexity Protocol used in products like Opyn. When purchasing a put users receive oTokens in return.
- TokenSets – Set Protocol-based asset management tokens. Investors buy into a single ERC-20 token with a programmable trading strategy and underlying components like ETH and cUSDC.
- tBTC – a decentralized and trustless system for wrapping Bitcoin proposed by Keep Project and the Cross-Chain Working Group. Bitcoin is deposited into a multi-sig wallet where the key holders are incentives to act accordingly by locking up other crypto assets as collateral (in this case ETH). Once this is confirmed on-chain, the TBTC smart contract mints the user with a 1:1 equivalent of the token on Ethereum.
- wBTC – wBTC is a multi-institutional framework for wrapping Bitcoin on Ethereum through the use of Merchants and Custodians to issue, burn, and custody of the underlying assets.
DeFi tokens create new and unique ways to gain access to promising opportunities in a permissionless fashion.
As we continue to watch new protocols explore different forms of tokenization, it’s likely that the opportunities for end-users to capture in the upside of the most popular DeFi products will only become more and more accessible.
If there is a token that you feel should be added to this list, please contact us.