DeFi – The Good, The Bad and The Ugly

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Since decentralized finance (DeFi) exploded in popularity in 2020 and 2021, so many projects have sprung up that there are bound to be winners – and losers.

Source: Vladimir Kazakov/Shutterstock.com

Today, we’ll be looking at the DeFi crypto projects that are thriving… those that are struggling… and some potential game changers for the reigning DeFi heavyweights.

Polkadot gets a “great app”

Most of the DeFi apps we’ve seen are highly specialized. Yield products, for example, are particularly popular – usually chargeable way more than you’d get from traditional financial services (or “TradFi”, as it’s commonly known in the new digital world). But there are not many DeFi projects comparable to PayPal (NASDAQ:PYPL) Where To block (NYSE:SQ), where you can do a lot with just one app…

Until now. One of the biggest DeFis on Peas (USD-DOT), Parallel Finance, transforms its platform into a great application.

To that end, Parallel is launching six new products, “from staking wallets, equity lending to cross-chain bridges, automated market maker and yield farming to boot”, CoinDesk reported Friday.

If you are willing to go for a centralized exchange, you can get a lot of these features… But when you can go for a DeFi and also get the crowdfunding – and AMMs, which allow you to trade much cheaper, in addition to getting into yield farming – this could be a good way to poach users of Coinbase (NASDAQ:PIECE OF MONEY) and its cohort.

Parallel Finance has ambitions to move from Polkadot to OG, Ethereum (ETH-USD), and its big projects are backed by big capital – from Sequoia to Polychain Capital, Pantera and Alameda Research to Sam Bankman-Fried.

Can Aave and SushiSwap Bring DeFi Back in Style?

Without these slick, all-in-one apps – and with lots of intimidating jargon and fancy techniques to learn – DeFi is out of fashion lately. Now, blockages asks: “Can the new launches of Aave and Sushi usher in the return of DeFi?”

SushiSwap (SUSHI USD) was one of the hottest cryptos in “DeFi Summer” 2020 and 2021 – but it has been mired in drama for months. Now this Uniswap (UNI-USD) clone seeks to reclaim his throne with a new version: Trident.

Trident, which has just been launched in beta version on the Polygon (MATIC-USD), is a new framework for AMMs. “Trident lets anyone create a pool of liquidity, much like Uniswap does. Unlike Uniswap, pools can have a token imbalance rather than a 50-50 split – a feature of another rival decentralized exchange, Balancer,” writes Blockages.

Meanwhile, Aave (AAVE-USD), which is also part of the Polygon ecosystem, has moved to its V3. Major new features include portals, for a seamless transition between blockchains. And now, if you stick to one asset class, like Bitcoin (BTC-USD) or stablecoins, Aave lets you “access higher borrowing power” (with High Efficiency Mode) and limit your exposure to risk from new, unproven cryptos (with Isolation Mode).

All of this has been good for SUSHI and AAVE prices, which have been stuck in a downtrend since October. AAVE, in particular, is up around 35% in the past week.

Hacks continue in DeFi startups

DeFi has many advantages, but the protocols often leave room for thieves to swoop in, especially on smaller upstarts.

On Sunday, for example, $600,000 worth of crypto was stolen from 29 wallets on Li Finance, Cointelegraph reports. Most of these wallets were quickly redeemed by Li Finance’s treasury – and all of them had activated its “infinite approval” feature.

“Infinite Approvals allow users to trade coins on a decentralized exchange an unlimited number of times without having to approve other transactions”, Cointelegraph Explain.

More on the Phantom (FTM-USD) network, hackers seized $3 million in USD coin (USDC-USD). This one happened on Deus Finance and involved “flash loans, a form of unsecured lending using smart contracts”, CoinDesk reported Tuesday. What a great reminder for DeFi enthusiasts to approach these instant gratification features with a lot of caution!

This is the best of times for THORChain and the worst of times for Anchor Protocol

Lately, some of the biggest moves – good and bad – among reputable cryptos are happening in DeFi.

the Anchor protocol (ANC-USD) the community debated reducing that sweet, sweet 19.5% yield for users who park their TerraUSD (UST-USD) stablecoin in Anchor Protocol. As a result, ANC crypto is down around 26% this month – and it’s halved from its March 4 all-time high:

Source: CoinMarketCap

Anchor’s first yield cut proposal (which would have only affected large investors anyway) failed on Thursday. Now another is on the table. If Proposition 20 wins the vote on Wednesday, it would create a “semi-dynamic rate of gain” where Anchor’s yield would rise and fall alongside yield reserves.

So it’s all about making the return more stable – which has been a growing criticism of Terra… But it hasn’t been well received in the ANC crypto price.

THOR Chain (RUNE-USD), on the other hand, is up more than 150% in March! In the past week alone, its “substantial 52.4% return” made it DeFi’s biggest gainer, analysts at Messari noted.

Source: CoinMarketCap

Messari added that “RUNE’s rally can be attributed to recent cross-chain liquidity protocol feature introductions that include the launch of synthetics, coupled with the current positive investor sentiment towards Cosmos-based projects.”

Cosmos (ATOM-USD) is a favorite for our InvestorPlace Crypto Investor Networkas I noted here in The new digital world before. Their latest research report, The third wave of wealth tokenization, offers much more actionable information. All these reports for the Crypto Investor Network are completely free for members: Click here to learn more and get involved.

As of the date of publication, Ashley Cassell had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines. To get more news from The New Digital World delivered to your inbox, click here to subscribe to the newsletter.

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