Bybit Learn
Bybit Learn
6 мая 2022 г.

11 Best DeFi 2.0 Projects: Coins and Tokens to Invest in for the Next DeFi Summer

As the world continues to witness the rise of cryptocurrency, there’s no shortage of eye-catching projects that will define the future of decentralized finance. Every serious investor should keep an eye on eleven ground-breaking projects that are greatly undervalued at this time. A sudden spike in crypto prices will likely propel these projects on a record-breaking spree.

Here is what this article will cover:

  • What makes DeFi 2.0 projects special

  • How to identify the best DeFi 2.0 projects

  • 11 DeFi 2.0 projects for the next DeFi summer

What Is DeFi 2.0?

DeFi 2.0 is a series of decentralized financial projects that try to improve on the original DeFi concept by making financial assets more accessible, profitable, and less risky.

Transition from DeFi to DeFi 2.0

The idea behind DeFi — decentralized finance — is to offer financial services to everyone without the typical restrictions imposed by banks and related financial intermediaries.

Also known as DeFi 1.0, it aims to support financing activities similar to a traditional bank, but without lengthy paperwork and scrutiny. Instead of going to the bank and following strict eligibility rules, anyone can access a DeFi 1.0 platform to get a loan, lend money and buy insurance from a P2P platform.

However, DeFi 1.0 has had its fair share of challenges. For instance, the highly volatile crypto market poses a risk for liquidity providers. Similarly, the self-regulating function of the smart contract has proved risky because there’s nothing that one can do if funds are stolen. Higher gas fees due to scalability issues means that service providers often offer slow and expansive services.

DeFi 2.0 is the answer to these shortcomings. Today's best DeFi 2.0 projects tackle liquidity through cross-chain bridges which connect blockchains, ensuring adequate liquidity for every asset. Likewise, open-source communities oversee audits of smart contracts so that smart contracts are protected by insurance. In the past, users needed hefty collateral to get loans. Now, loans are self-repaying as yield farming is used to pay off the balance.

Of course, these aren’t the only solutions provided by DeFi 2.0. In the past two years, many new DeFi 2.0 projects have surfaced. Each of these projects aims to solve one or more underlying problem(s). Despite the innovation and the technology, it can be a challenge to find the best DeFi 2.0 projects to invest in.

Here’s how to do it.

How to Find Worthwhile Upcoming DeFi 2.0 Projects

There are a lot of ways to invest in an upcoming DeFi 2.0 project. In the long run, buying DeFi 2.0 tokens is perhaps the easiest method to capture the value. Some investors also prefer yield farming, liquidity mining and staking for a quick turnaround. In addition, websites such as DefiLlama offer critical insight into many upcoming Defi projects, making it the quickest method to pluck golden nuggets from a potentially endless list of investment opportunities.

Despite a myriad of opportunities in the DeFi space, not every DeFi project is a winner. Finding the best DeFi 2.0 project can be a tough task — especially if you don't know how to evaluate a particular investment opportunity.

Luckily, here are a few meaningful indicators that can help investors reveal such winners. When deciding whether to invest, keep these five important metrics in mind when seeking the best DeFi 2.0 projects.

Easy-to-Understand Core Dynamics

To attract investors, the best DeFi 2.0 projects offer a streamlined overview of a project’s goals, utility and credentials. A complex user interface, industry jargon and lack of information don’t serve the purpose anymore. Therefore, a neat interface and a helpful web page are essential for successful publicity.

Active Community

No DeFi project can succeed without an active community. The community is the driving force behind the entire ecosystem. It helps keep the project transparent by overseeing governance protocols, future opportunities and user experience.

Strong Backing from Institutions

Before investing, look for signs of institutional backing. The best Defi 2.0 projects are supported by institutional-grade funding. Availability of funds ensures that developers can implement their ideas and try new protocols. The funding also keeps everyone interested through regular incentives and rollouts.

Audits to Prevent Hacks

Hackers regularly target smart protocols to destabilize a project. If a DeFi project fails to address software issues, it remains at the mercy of hackers. Therefore, carefully read the security fine print. A good DeFi project does security testing and completes an audit of its smart contracts before listing them.

Healthy Tokenomics

Tokenomics offer an overview of all the elements that make a DeFi 2.0 coin or token attractive to investors. These stats are a metric that enables investors to gauge the health of a DeFi project and its assets. Project utility, supply & price stability mechanisms, distribution of coins, and governance are the main indicators of a healthy DeFi 2.0 project.

Best DeFi 2.0 Projects to Invest In

Following is a list of some of the best DeFi 2.0 projects to invest in for the upcoming season:

  • Rari Capital: Aims to make DeFi finance accessible to ordinary people without a tech background.

  • Convex Finance: Helps investors and liquidity providers earn higher rewards compared to the existing market.

  • Uquid: Designed to offer contactless crypto payments to users around the world.

  • Synapse: A DEX that offers liquidity to traders and networks looking for additional liquidity.

  • Rarible: An open-source protocol for developers to easily create and advertise NFTs.

  • Tokemak: An aggregator that gives users the ability to provide liquidity to DEX and DeFi platforms while earning yields.

  • Frax Protocol: Seeks to introduce a highly scalable and decentralized asset that can overcome deficiencies related to fixed-supply digital assets such as BTC.

  • Abracadabra: Allows investors to borrow MIM without using their interest-bearing tokens.

  • Algorand: Aims to solve problems associated with decentralization, speed and scale.

  • Centrifuge: Makes credit more accessible by bringing the untapped economy of real-world assets to the blockchain.

  • The Graph: A decentralized protocol for querying and indexing data from blockchains.

Rari Capital (RGT)

Rari Capital is a forward-looking DeFi 2.0 project that aims to make DeFi’s benefits accessible to people who don’t have a tech background. It greatly simplifies investment activities such as lending, borrowing and yield farming.

Using the platform, developers can automate their offerings so that they can focus on developing software protocols instead of spending useless time on advertising.

At the moment, the RGT DeFi 2.0 token is trading at around $14, and there’s already speculation that it may reach the $100 milestone as early as 2023.

The group's Fuse offering is just one example of the many innovative products that should keep the ball rolling. Fuse is an open-interest rate protocol which facilitates the permissionless creation of borrowing and lending pools.

Overall, a vibrant community, strong investment, and continued innovation make it a stand-out project to invest for the long haul.

Convex Finance (CVX)

Convex Finance is a well-established DeFi 2.0 project that helps investors and liquidity providers earn higher rewards compared to the existing market.

Built on top of Curve Finance that’s best known for its efficient stablecoin rates, Convex Finance enjoys high liquidity due to the incentive mechanism that it shares with its stakeholders and liquidity providers.

Irrespective of the number of tokens, the intuitive model allows all types of stakeholders to receive the maximum reward boost. It does this by encouraging everyone to pool their assets, and turning them into veCRV. Similarly, liquidity providers can participate in various income streams, including base interest rate, a slice of Curve Finance’s platform trading fee, Convex-boosted CRV rewards, and liquidity mining.

As of this writing, Curve Finance is one of the world's largest decentralized exchanges. The power of the exchange stems from its simplicity: It only focuses on creating new opportunities for CRV token holders and Curve liquidity providers.

Convex Finance has become a major player in the DeFi 2.0 scene. Investing in CVX DeFi 2.0 coins has major upside potential, as almost every analyst is upbeat about the prospect.

Uquid (UQC)

UQC is among the DeFi 2.0 coins built on the ERC-20 mechanism. Its main purpose is to support the growth of the UQUID network, which is designed to offer contactless crypto payments to users around the world. Much like the best crypto credit and debit cards in the market, the UQUID card initiative sets out to be the first prepaid card that supports over 100 types of cryptocurrencies.

Since the launch of the project, it’s received backing from almost every major crypto platform. Its utility is further enhanced because the card can be used in real-life settings. Cardholders can easily convert crypto to paper currency, and withdraw it from several locations.

The card is already featured on multiple cryptocurrency platforms. Its ability to convert virtual currencies to paper currencies is a major incentive for developers. Overall, UQC has great potential. Future collaborations and innovations will likely increase both the number of users and more widespread ‘adoption.

Synapse (SYN)

Synapse is a cross-chain decentralized exchange that offers liquidity to traders and networks looking for additional liquidity.

The use of liquidity pools offered by Synapse is a game-changer for lots of new startups hampered by illiquid markets. These liquidity pools are open to everyone. The automated market maker models and a peer-to-contract structure ensure that there’s enough liquidity to accommodate even the smallest of assets.

Synapse also has a thriving DeFi ecosystem. Unlike many other platforms, Synapse supports easy onboarding. Since there is no AML or KYC regulation, anyone can simply connect an e-wallet and start earning from various investment opportunities. This open market structure also encourages participants to obtain financial services without undergoing scrutiny.

The management of Synapse is actively working on developing a proof-of-stake blockchain which will help validators stake SYN to secure the network. A solid investment backed by infrastructure-enhancing services and more than 100 success-oriented solutions makes Synapse a DEX to watch for in the coming year.

Rarible (RARI)

Rarible is a popular NFT marketplace which is supported by an extensive ecosystem of NFT creation, storage and trading.

The objective of Rarible is to offer an open-source protocol with which developers can easily create and advertise NFTs. Among the most notable features is locked content. Using this feature, developers can offer a highly immersive experience to NFT collectors. Unlocking allows NFT holders to receive high-resolution files, watch behind-the-scenes videos, get exclusive deals, and participate in member-only events.

The Rarible platform is a great place to find rare NFT art. The interface can sort NFTs based on price, features, popularity, value, and other metrics. Besides NFTs, investors can earn rewards using liquidity mining.

The management is actively looking to allocate more funds to next-gen Web3 projects. These projects will be built on the Rarible protocol to support and expand the existing ecosystem beyond the NFT space.

Since its launch, the project has helped thousands of creators enter the NFT space without any coding. Apart from the popular NFT marketplace, the proposed projects will likely boost the value of RARI DeFi 2.0 tokens in 2022.

Tokemak (TOKE)

Tokemak is a crypto liquidity aggregator for decentralized exchanges. It gives users the ability to provide liquidity to DEX and DeFi platforms while earning yields.

The framework is developed to overcome deficiencies in market-making systems. The traditional market-making model can be inefficient, unpredictable and costly, resulting in high costs and reliance on large crypto holders. Tokemak solves the liquidity problem by leveraging several components, providing users with cheaper, more efficient and transparent liquidity.

Using Tokemak, users can decide where and how to provide liquidity. In return, they’re rewarded in incentivized staking yields for their efforts. Efforts are currently underway to integrate the TOKE token into the DAO governance structure. The role of TOKE will continue to expand in the future.

While the concept of outsourcing liquidity to a third party isn’t new, it’s a powerful incentive for participants in an evolving crypto ecosystem. If Tokemak’s management plays its cards right, the project could quickly reach maturity by allowing all liquidity flows to pass through its platform. Perhaps this alone is a powerful incentive for investors to keep Tokemak on their radar.

Frax Protocol (FXS)

Frax Protocol has introduced the first fractional-algorithmic stablecoin. Unlike many other stablecoins, the supply of FXS DeFi 2.0 tokens changes based on the supply and demand. The end goal of the system is to introduce a highly scalable, decentralized asset that can overcome deficiencies related to fixed-supply digital assets like BTC.

To meet its goal, the protocol depends on the world's first fractional-algorithmic model to keep its value pegged near $1. For instance, if the stablecoin is trading above $1, the algorithm will decrease the collateral ratio, and vice versa.

Before FRAX, stablecoins were divided into three distinct categories: Fiat collateralized, overcollateralized with cryptocurrency, and algorithmic with no collateral. However, the introduction of the new model has given stakeholders a new paradigm to test.

With possible cross-chain implementations in the future, it's the right time to think about adding it to the portfolio.

Abracadabra (SPELL)

Abracadabra is a lending protocol which allows users to deposit interest-bearing assets as collateral to borrow Magic Internet Money (MIM), a stablecoin that can be used across multiple blockchains.

The concept allows investors to borrow MIM without using their interest-bearing tokens. As a result of this unique setup, investors can free up liquidity using tokens and MIM to enhance their revenue.

According to its founders, Abracadabra is a direct competitor with other stablecoins. Since DeFi 2.0 coins such as DAI are collateralized by a centralized stablecoin, most existing stablecoins have lost their luster. Abracadabra solves this paradigm by depositing illiquid interest-bearing tokens to mint a liquid asset, MIM. Besides MIM, Abracadabra has a utility and governance token, SPELL.

One of the most innovative products of this DeFi project is a multi-chain yield optimization platform,

Popsicle Finance. At the moment, the main aim of the community is to develop a protocol that can optimize liquidity provision across all decentralized exchanges and blockchains. The ultimate goal is to leverage liquidity provision on Popsicle Finance using Abracadabra.

The road map for the future looks bright, as the team behind Abracadabra seeks to automate liquidations by creating more utility for MIM. In addition, there are various plans to expand the project to more chains backed by strong communities. Investors may wish to jump on the bandwagon before Abracadabra becomes the largest decentralized stablecoin in the crypto space.

Algorand (ALGO)

Since its launch in 2019, Algorand has remained one of the most attractive investment options in the crypto world. The project is trying to solve problems associated with decentralization, speed and scale. It does this by providing infrastructure and tools that developers can use to create apps and assets.

Theoretically, Algorand allows everyone to participate in the proof-of-stake mechanism thanks to its use of the Byzantine consensus. It also means that participants can participate just by holding coins in their wallets. The project takes guidance from a well-known team of experts. One of the members of the team recently won a Nobel Prize for his contribution to the field of economics.

Algorand is a pure proof-of-stake blockchain cryptocurrency protocol, which allows it to complete transactions in just five seconds. Accordingly, it's easy to conduct transactions, and the transaction fee is among the lowest in the industry.

Currently, more than 500 companies are using Algorand technology. A strong team, growing community, well-established partnerships, and the development of a gamification system will likely keep investors and analysts on their toes. It's a solid project that has the potential to provide significant returns in 2022 and beyond.

Centrifuge (CFG)

Centrifuge is a lending protocol which makes credit more accessible by bringing the untapped economy of real-world assets to the blockchain. It allows people as well as small businesses to tokenize their real-world assets, such as real estate, mortgages and invoices. These assets can be used to access funds from the platform's lending app.

Lenders can lock stablecons, DAI, in Tinlake pools to let businesses take advantage of the liquidity. Due to the risk involved, Centrifuge offers a much higher return to lenders as compared to the market. Investors can also choose DROP tokens, which offer lower returns and protection from default.

There’s a lot of support for this project. Major companies including Fenbushi, Moonwhale and FinTech Collective are playing an active part in supporting the initiative. In addition, the platform has received commitments from major investors and venture capital firms.

The utility of the token is manifested in its goal of offering a global finance grid that distributes money in a fair and trustless way. If everything remains intact, there are tell-tale signs of substantial upward movement beyond what's predicted by analysts.

The Graph (GRT)

The Graph is a decentralized protocol for querying and indexing data from blockchains. It works much as Google does to index useful information from various blockchains.

Previously, it indexed content on Ethereum. However, it’s now running on various well-known blockchains that aren’t compatible with Ethereum. The most useful feature of The Graph is its ability to access useful data to run and operate DEXs more efficiently.

Today, The Graph has established itself as one of the critical components of DeFi 2.0 infrastructure. The data can be transformed, organized and shared across applications. Since its launch in 2020, The Graph has already surpassed a billion queries.

Various DApps have already deployed more than 1,700 subgraphs. The subgroup may eventually be composed of a global graph that will contain all the world's public information. If the crypto space continues to gain traction, there’s little doubt that The Graph will be at the forefront of DeFi 2.0 projects.

The Bottom Line

The future of crypto will be defined by the improvements that the best DeFi 2.0 projects offer. Even a small price recovery in the crypto markets can result in a staggering rise in the value of the underlying tokens. Therefore, ignoring these projects may be bypassing an opportunity for substantial profits for the foreseeable future.