Wondering what the best DeFi projects are in 2023? From dexes to DAOs to lending protocols, we're looking at the top DeFi projects based on total value locked in 2023 for you to research.
For informational purposes only. Not financial or tax advice. Learn more → Editorial Policy.
What are the best DeFi protocols in 2023?
The most popular largest DeFi protocols by TVL are as follows:
- What? Liquid staking solution for Ethereum, Polygon, and Solana
- Built: 2020
- TVL: $13.9 billion
- Blockchain: Ethereum, Polygon, and Solana
- Token: LDO
Lido stands as a pioneering decentralized liquid staking platform, recognized for its enduring popularity with a staggering TVL exceeding $10.2 billion. Although Lido's genesis was intertwined with Ethereum, it now offers staking capabilities for both MATIC and SOL as well. Previously, users could stake Polkadot and Kusama with Lido but unfortunately as of early 2023, this is no longer available.
For the cryptocurrencies that remain supported, Lido's process is straightforward. Simply pick your preferred cryptocurrency for staking, connect your wallet, and specify the desired staking amount. Upon staking your cryptocurrency, you'll receive tokens representing your staked assets—these tokens can be either stETH, stMATIC, or stSTOL, depending on your staked crypto.
These tokens are versatile and can be utilized across various DeFi protocols. Whether you aim to provide liquidity, employ them as collateral for loans, or deposit them to earn yields, Lido empowers you to maximize the benefits of non-custodial staking without compromising liquidity.
Lido's appeal extends globally, particularly to investors seeking to avoid the intricacies associated with centralized cryptocurrency exchanges, along with their operational and regulatory challenges. However, it's essential to recognize that, like any crypto investment, Lido has its share of risks.
Notably, there is a slight risk associated with stETH, stSOL, and stMATIC tokens, as they are pegged to the value of other cryptocurrencies and could potentially depeg during turbulent market conditions. Additionally, utilizing smart contracts carries inherent technical and security risks, although Lido has not encountered any such breaches thus far.
- What? An Ethereum-based DAO protocol that mints the DAI stablecoin and facilitates collateral-backed loans
- Built: 2014
- TVL: $4.9 billion
- Blockchain: Ethereum
- Token: MKR and DAI
MakerDAO is a decentralized autonomous organization (DAO) that develops and operates Maker, a smart contract platform for borrowing, saving, and issuing stablecoins. The Multi-Collateral Dai (MCD) system enables users to generate a stablecoin called DAI by collateralizing assets accepted by the Maker governance community. Dai is soft-pegged to the U.S. dollar and its stable value makes it a good cryptocurrency with which to issue loans, send remittances, and hedge against volatility.
Dai can be purchased from centralized and decentralized exchanges. Investors can also generate Dai when opening a Maker Collateral Vault. Previously known as collateralized debt positions (CDPs), vaults are smart contracts that run on the Ethereum blockchain and hold collateral in escrow until the borrowed Dai has been returned.
To transact a Dai stablecoin loan through MakerDAO, you can deposit any Ethereum-based asset as collateral as long as it has been approved by the MKR holders who govern MakerDAO. Once borrowed, Dai is one of the most integrated digital assets in all of blockchain. In particular, it is utilized around the decentralized finance (DeFi) ecosystem, and in the growing sector of blockchain-based gaming and collectibles.
The Dai Savings Rate (DSR) enables Dai holders to earn interest automatically by simply locking their Dai into a DSR contract. This provides investors the option to make a steady predictable income while waiting for better market conditions. Hodlers are probably the most suitable individuals to use DSR.
Read next: What is a DAO?
- What? Lending protocol to earn interest on deposits and borrow crypto, including flash loans.
- Built: 2017
- TVL: $4.5 billion
- Blockchain: Ethereum, Polygon, Avalanche, Arbitrum, Optimism, Base, Metis, Fantom, and Harmony
- Token: AAVE
Aave is a lending DeFi protocol, originally built on the Ethereum network. Aave allows investors to lend and borrow cryptocurrency without having to go through a centralized intermediary. Aave hosts a range of cryptocurrencies, from stablecoins to altcoins. These cryptos can be borrowed for stable and variable interest rates or users can lend cryptocurrencies into liquidity pools and earn interest on deposits.
Borrowers can swap a variable rate for a fixed rate and vice versa. This provides the user with the freedom to get the best interest rate possible at any given time.
The Aave lending protocol utilizes a native token called AAVE, formerly $LEND. The AAVE token is used for governance and can be staked on the Aave DeFi platform in return for fees and other rewards.
Read next: 15 best crypto lending protocols and platforms
- What? Lending protocol for the TRON blockchain
- Built: 2020
- TVL: $3.7 billion
- Blockchain: TRON
- Token: JST
JustLend is a DeFi lending protocol developed on the Tron network. It empowers users to seamlessly lend and borrow TRON, TRC-20, and TRON stablecoins like USDT, without the intervention of traditional centralized financial systems. JustLend encompasses a diverse suite of cryptocurrencies, ranging from established stablecoins to emerging tokens.
Users can either borrow these cryptos at fluctuating or fixed interest rates or provide their own cryptocurrency to liquidity pools, thereby earning interest on their contributions. As well as this, the platform allows investors to stake USDT in order to earn steady rewards.
Integral to the JustLend ecosystem is its native token, JST. This token facilitates governance decisions and can be utilized within the JustLend platform at a 1:1 ratio on proposals for votes.
- What? A decentralized exchange protocol for automated liquidity provision.
- Built: 2018
- TVL: $3.2 billion
- Blockchain: Ethereum, Arbitrum, Polygon, Optimism, Celo, Base, Binance Chain, and Avalanche
- Token: UNI
Developed by Uniswap Labs, the Uniswap protocol is a peer-to-peer system designed for trading crypto tokens on a variety of blockchains (primarily Ethereum) via smart contracts. Uniswap's major draw lies in the variety of cryptocurrencies on the platform. This is due in part to Uniswap's almost near-zero coin listing fee. Absolutely any ERC-20 token can be listed on Uniswap. Each token has its own smart contract and liquidity pool and if one doesn’t exist, it can be created easily.
When adding liquidity, users need to contribute equivalent amounts of both cryptocurrencies to the pool. For example, if you choose the Ethereum/Dai pool, you'd need to lend Ethereum and Dai. In return for your contribution, Uniswap will pay you a share of the transaction fees for that liquidity pool. Keep in mind, that gas fees depend on the congestion at the time of a transaction, not the amount of the transaction. This makes Uniswap a poor choice if you're only trading a small amount. It doesn't make sense to pay $30 in fees for a $50 trade.
Whenever new ETH/ERC20 tokens are contributed to a Uniswap liquidity pool, the contributor receives a liquidity pool token, which is also an ERC-20 token, and some of these tokens may be utilized for compound earnings on other DeFi protocols.
- What? A decentralized lending and yield protocol
- Built: 2016
- TVL: $2.1 billion
- Blockchain: Ethereum
Formerly Oasis,app, Summer.fi was one of the first DeFi protocols around from MakerDAO, launched back in 2016 - although it’s come a long way since then. Summer.fi no longer sits under the umbrella of MakerDAO, although the protocol still allows investors front-end access to the Maker protocol.
With Summer.fi, investors can pick from three different product offerings - multiply, borrow, and earn. Multiply offers leverage for a huge number of crypto assets, while borrow allows you to loan more crypto against your holdings. Finally, earn offers long-term yields to compound your crypto capital, with a number of automated strategies available with varying risk levels.
Thanks to a relatively intuitive userface, these rather complex investment options like yield loops are more readily available to the average investor. As always, you should DYOR to fully understand the risks before investing.
- What? Decentralized exchange specializing in stablecoins.
- Built: 2020
- TVL: $2.1 billion
- Blockchain: Ethereum, Arbitrum, Polygon, Base, Cell, Avalanche, Optimism, Kava, Gnosis, Fantom, Moonbeam, and Aurora
- Token: CRV
Governed by smart contracts, Curve lets users and other decentralized protocols exchange stablecoins (DAI to USDC for example) with low fees and low slippage. Curve makes use of liquidity pools like Uniswap. To achieve this, Curve needs liquidity, which is rewarded by those who provide it.
Every time someone makes a trade on Curve.fi, liquidity providers receive a small swap fee split evenly between all providers. Trade volume is the key to returns. Curve's liquidity pools are also supplied to the likes of Compound's interest-earning protocol in the background, so you get extra interest on top of the trading fees.
Curve rewards loyalty. Curve's governance token, CRV, is used for voting on proposed changes to the protocol. Curve has a "time-weighted" voting system, meaning the longer a user holds CRV, the more voting power their tokens have. CRV tokens can be locked for a period of between one week and four years. In exchange for their locked tokens, the Curve users VECRVS tokens, which afford extra voting power. In addition to that, users could use VECRVS to boost their pool rewards up to x2.5. ECRVS could also be used to get a refund for some of the protocol’s fees.
- What? DeFi lending protocol
- Built: 2018
- TVL: $1.8 billion
- Blockchain: Ethereum, Polygon, Base, and Arbitrum
- Token: COMP
Compound Finance, typically known simply as Compound, is a pioneering DeFi lending protocol based on the Ethereum network, although it's since expanded to include support for other networks. The platform has revolutionized the way individuals interact with financial assets, enabling them to lend or borrow cryptocurrency without the need for traditional intermediaries. With Compound, a plethora of digital assets, including various stablecoins and altcoins, are made available for users.
Lenders deposit their assets into Compound's liquidity pools and earn interest over time, based on the demand for those assets. Borrowers, on the other hand, can take loans by providing collateral, with interest rates dynamically adjusted by the protocol based on supply and demand.
One of Compound's standout features is its native governance token, COMP. Holders of COMP have the ability to propose and vote on changes to the protocol, ensuring that its evolution is in the hands of its community. Moreover, by using the platform, users can earn COMP, aligning their interests with the overall success of Compound.
- What? Yield farming protocol for Curve Finance
- Built: 2021
- TVL: $1.7 billion
- Blockchain: Ethereum, Polygon, and Arbitrum
- Token: CVX
Convex Finance is an innovative DeFi solution stationed on the Ethereum network, tailored specifically to boost the rewards for liquidity providers using the Curve Finance platform. It acts as an optimizer, aiming to maximize yields for users who lock in their assets.
By interacting with Convex, users can deposit their Curve LP tokens and in return receive Convex LP tokens. These tokens represent the user’s claim in the pool. The advantage? Convex automates the process of claiming and compounding CRV rewards, which potentially offers higher returns than directly staking on Curve.
A distinguishing feature of Convex Finance is its native token, CVX. Beyond being a tradable asset, CVX allows holders to participate in protocol governance, which means they can influence decisions about the platform's future direction. Additionally, by staking CVX or participating in the Convex platform, users have opportunities to earn more CV
- What? Liquid staking solution for Ethereum
- Built: 2021
- TVL: $1.7 billion
- Blockchain: Ethereum
- Token: RPL
Rocket Pool is a decentralized Ethereum liquid staking protocol. While it might appear petite in the vast universe of staking platforms, it's a solid choice for those eyeing non-custodial Ethereum staking without the typical limitations such as hefty minimum deposits or liquidity constraints. A testament to its reliability, Rocket Pool boasts a staking volume exceeding 800,000 ETH and is supported by a robust network of more than 3,000 node operators.
The platform offers two staking solutions.
For those keen on both staking and node operation, Rocket Pool stands out by requiring just a 16 ETH staking deposit, halving the standard 32 ETH benchmark. Additionally, stakers are incentivized with supplementary RPL tokens when they furnish RPL collateral - a requisite acting as protocol insurance. As of this moment, opting to stake while operating a node via RPL fetches an enticing 7%+ APR, complemented by fluctuating RPL rewards.
Alternatively, Rocket Pool caters to those preferring to stake without delving into node operations. Such stakers enjoy a nominal minimum deposit threshold of just 0.01 ETH. Moreover, this staking modality operates on a liquid staking principle; depositing ETH translates to acquiring rETH tokens, which can be leveraged across various DeFi platforms, amplifying your returns.
Rocket Pool has partnered with premier crypto tech auditing maestros like Sigma Prime, Consensys Diligence, and Trail of Bits to make sure the protocol is watertight when it comes to security. Furthermore, its bug bounty program acts as an open invitation to ethical hackers, incentivizing them to bolster Rocket Pool's defense mechanisms.
Read next: What's the best crypto to stake?
Don't forget the tax implications
While most tax offices haven't yet got around to releasing guidance on the tax implications of DeFi, that doesn't mean your DeFi transactions are tax free. Learn more about how DeFI is taxed.
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