By far, the most popular use of Ethereum is shaping up to be a stack of permissionless financial services. It started with overcollateralized lending on the Maker Protocol and has spread across a range of different services in the span of a few years. As Ethereum stakes its claim as the base layer for permissionless finance, let’s take a look at some of the applications built on top of it.
The most popular financial dApp is still Maker by a long shot, with nearly $350 million locked in the protocol. That’s a value higher than most cryptocurrencies in existence today. Maker commands nearly 1.5% of the total ETH supply and is slowly shaping up into one of the most important financial innovations of the last few years.
Following Maker are the likes of Synthetix, Compound, dYdX, InstaDapp, and Uniswap. Permissionless liquidity pools like Uniswap and Kyber Network are an integral part of the ecosystem. By automating the market making process, they have essentially created an exchange with fixed rates that hinge on demand and supply. There are no limit orders – only market orders. This has the potential to completely oust the decentralized exchange model as the future of liquidity management and token procurement.
Compound is like Maker’s little brother. It is essentially a money market that allows investors to earn a yield on their assets, and borrowers to take out a permissionless loan. As the title “money market” suggests, these are more directly liquid than Maker, and this is going to be Compound’s moat in the coming years.
Then we have simplified interfaces like InstaDapp that help make the UX for Maker and Compound simpler in orders of magnitude. A few clicks and you can convert your ETH into DAI, deposit it on a Compound money market, and start earning interest. You can even pay off your CDP or utilize Uniswap.
One of the most interesting DeFi projects in Synthetix. One can stake SNX tokens and mint sUSD, a USD pegged stablecoin, and trade sUSD for a plethora of synthetic assets on their native exchange. Synthetic assets include gold, Japanese yen, Euro, exchange tokens, Bitcoin, Ethereum, and even short tokens (a token that appreciates when the price of the underlying asset goes down). The real value prop of Synthetix is the fact that it allows one to mint synthetic assets that mimic the price of the underlying asset.
Ethereum’s open finance stack is incredibly robust and gaining momentum on a daily basis. It is truly fascinating to think about the wide range of services available over the network. From lending on Maker, earning interest on Compound, to taking out an insurance policy with Nexus Mutual, or swapping assets on Uniswap, the possibilities are endless.
The best part is that this ecosystem is young, it is glaringly obvious that its best days are currently ahead of it. Not keeping up with the events on open finance on Ethereum would be a huge opportunity missed for anyone involved in crypto!