As we approach the end of 2019, it’s fair to say a lot of fundamental development that occurred on-chain for public ledgers revolved around open financial protocols, or as the cool kids call it, “DeFi”. DeFi, which stands for decentralized finance has been an extensive movement that truly found its shape in 2019, December 27, 2019.
Top Financial Protocols Under the Lens
In an industry where new things happen every day and new products are visualized and launched at warp speed, it’s difficult to pinpoint where exactly to start from. So just to make it that much easier, I’ll go through the events on a protocol basis, from largest to smallest.
Maker. the revered titan of open finance made its most significant development (Multi Collateral DAI) halfway through November 2019, but it still stands as one of the most important things to happen this year. A lot of people weren’t as psyched about Multi Collateral DAI (MCD), because Basic Attention Token (BAT) as collateral isn’t very exciting. But when you realize that this now opens up the door to ERC-20 tokens, and other items – potentially property and commodities – tokenized on Ethereum to be used as collateral, the big picture is instantaneously revealed.
Compound, the easiest way to earn interest on your crypto, launched v2 of their money market and saw an exponential rise in value locked in their protocol, peaking at $128 million after starting 2019 at just $14 million. The core team also put their intent to further decentralized the project onto paper, giving stakeholders and ETH-heads something riveting to look forward to.
The biggest success story 2019 saw with respect to open financial protocols is undoubtedly. Standing at the forefront of financial inclusions, , and the ability to bootstrap liquidity with a native token, Synthetix truly sets itself apart in 2019, and 2020 promises more of the same. Albeit marred by arbitrageurs frontrunning their centralized oracle and gaming the system, the Synthetix team proved their mettle by accepting this was a point of failure and turning to a more proven oracle solution: ChainLink.
Recap of Other Important Outcomes
There are some strong contenders for the top 5 spots of 2019. Two protocols that immediately spring to mind are dYdX and Uniswap. dYdX moved away from 0x-based orderbooks and established their own native markets to be able to garner better liquidity. Although the trading UX is still a little rough around the edges, the team has very much been on top of it with constant improvements. And the icing on the cake, you ask? dYdX interest rates are evidently superior to Compound for borrowers, and recently, lenders too. It definitely strikes me as a more sustainable money market with a bright future ahead.
Uniswap and Kyber Network have quickly become crucial elements for Ethereum’s financial stack. They allow for a permissionless exchange of ETH and ERC-20 tokens with automated market making and strong incentives to provide liquidity at the protocol level. The only drawback is that only Ethereum-based assets can be traded on it, but it’s heading toward a broader goal that will ultimately be achieved in order for DEx’s to gain mass adoption – even from just the existing crypto community.