Guide to DeFi tokens and altcoins
From Aave to Zcash, get the info you need to decide what to trade
Whether you're just starting your crypto journey or you've been trading Bitcoin for years, there’s a good chance you’ve tried to dig into the world beyond Bitcoin and Ethereum only to find yourself confused by all the different cryptocurrencies out there.
After all, in the decade since Bitcoin began to catch on, thousands of alternatives have emerged — with an ever-growing selection available via Coinbase. In the last few years, tokens that help power decentralized finance (or DeFi) protocols have become increasingly popular — and so a number of the cryptocurrencies on this list come from that world.
If you’re ready to figure out the difference between XTZ and XLM, you've come to the right place. Here (presented in alphabetical order) is key information about some of the biggest and most important cryptocurrencies that aren't Bitcoin or Ethereum. Each of these "altcoins" (short for “alternative coins”) is tradable via Coinbase and other major exchanges, and they all have unique features, goals, and use cases.
Released: November 2017
Aave is a decentralized lending protocol (part of the broader group of protocols known as DeFi) that allows users to deposit crypto assets to earn APY rewards, and to borrow other crypto assets against that collateral. It makes it possible for users to borrow, lend, and earn interest on their crypto — making use of smart contracts instead of intermediaries like banks.
AAVE is a “governance token” that gives holders a say in the future of the protocol. It can also be staked, thus earning rewards for holders.
The Aave protocol facilitates the creation of lending pools. If you want to lend some of your crypto, you can deposit it into a pool. Anyone who wants to borrow deposited assets can draw from Aave pools as long as they provide sufficient collateral. (Fun fact: “Aave” means ghost in Finnish.)
How it works:
There are two types of tokens issued by the protocol: the native AAVE token and aTokens.
AAVE tokens, beyond giving holders a say in the protocol’s governance, offer advantages including discounts on fees or free use of some of the protocol’s services.
aTokens are received by lenders depositing to the lending pools, and they entitle them to earn interest payments. (If you deposit, say, ETH, you’ll receive aETH in return. When you pull your ETH out of Aave, your aETH will automatically be converted back to ETH.)
To help users take advantage of arbitrage opportunities (where a crypto might be valued higher on one exchange than it is on another) and maximize profits in the DeFi ecosystems, Aave also provides flash loans. These loans require no collateral and are settled instantly. The condition is that the borrowed amount needs to be paid back within the same transaction, along with a 0.09% fee, or the whole process will be cancelled and no funds are borrowed.
You can connect your crypto wallet to Aave at app.aave.com
Keep in mind: Standard loans on Aave require collateral (such as ETH) provided by the borrower. Because crypto can be volatile, it’s important to choose the collateral carefully if you use Aave to borrow crypto. If your collateral’s value drops below a certain threshold it can be liquidated (as in: you won’t get your money back) and you might be subject to added fees. For this reason, stablecoins are a popular collateral option. Be sure to carefully read Aave’s terms and conditions.
Released: June, 2019
Algorand seeks to build on similar projects like Ethereum by improving scalability, security, and reducing the amount of time it takes for transactions on the network to be considered “final.”
Developers can use Algorand to create decentralized applications — for loans, decentralized trading, and many other uses — that can take advantage of fast, low-cost transaction processing while scaling to a large number of users.
How it works: Algorand nodes reach consensus about what should appear in the blockchain through a process called PPoS (or “Pure Proof of Stake”) — which uses a staking system (instead of a Proof of Work mining system like Bitcoin’s) to verify new transactions and produce new crypto tokens.
Algorand network participants (or nodes) are able to stake some of their ALGO in exchange for the chance to be randomly selected to propose a new block of verified transaction. The winner is awarded new ALGO.
Keep in mind: PPoS systems like Algorand’s are more efficient than Proof of Work blockchains like Bitcoin in terms of electricity consumption, because they don’t rely on thousands of miners spending energy to solve cryptographic puzzles for the chance to win a block reward and earn transaction fees.
Bitcoin Cash (BCH)
Released: August, 2017
Bitcoin, in its original conception, was designed to be a form of digital cash people could use to make transactions online. Over time it has evolved into a “store of wealth” more like digital gold. Bitcoin Cash was created to continue the original peer-to-peer cash idea — via a high-volume, low-fee network that would be accessible to anyone with an internet connection.
How it works: The Bitcoin Cash blockchain is based on the original Bitcoin blockchain, but it has some distinct differences. A major one is an increased maximum block size of 32MB, compared to just 1MB on Bitcoin. Increased block size allows Bitcoin Cash to process transactions faster than Bitcoin, with lower fees and an increased per-second transaction capacity.
Keep in mind: Bitcoin Cash is available via virtually all exchanges and is supported by PayPal. But remember that even though it was designed to be faster and cheaper than Bitcoin, that doesn’t mean that Bitcoin users have abandoned the original for a newer version.
Released: September 2017
Cardano is designed to be a next-gen evolution of the Ethereum idea. It’s intended to be a flexible, sustainable, and scalable platform for running smart contracts, which will allow the development of a wide range of decentralized finance apps, new crypto tokens, games, and more.
Cardano’s native cryptocurrency is ADA, which can be used to store value, to send and receive payments, and for staking and paying transaction fees on the Cardano network.
How it works:
Cardano’s goal is to be the most environmentally sustainable blockchain platform. It uses a unique proof-of-stake consensus mechanism called Ouroboros, as opposed to the energy-intensive proof-of-work system currently used by Bitcoin and Ethereum. (Ethereum is also moving to a proof-of-stake system via the ETH2 upgrade). Learn more about proof of work and proof of stake blockchains
The Cardano blockchain is also divided into two separate layers: the Cardano Settlement Layer (CSL) and the Cardano Computing Layer (CCL). The CSL contains the ledger of accounts and balances (and is where the transactions are validated by the Ouroboros consensus mechanism). The CCL layer is where all the computations for apps running on the blockchain are executed — via the operations of smart contracts.
The idea of splitting the blockchain into two layers is to help the Cardano network process as many as a million transactions a second.
Keep in mind: As of May 2021, smart contact functionality has yet to be rolled out on Cardano. Developers say it will happen this year.
Released: November, 2017
Chainlink is a decentralized oracle network that is powered by the LINK Ethereum token.
Oracles are an important part of the decentralized finance (or “DeFi”) landscape: in the absence of a centralized authority, they’re the main mechanism by which DeFi apps receive accurate external data (especially prices). Until Chainlink was developed, there was no reliable solution that allowed smart contracts and DeFi apps to access external market prices.
How it works: Chainlink was designed to incentivize a global network of computers (or “nodes”) to provide accurate data to Chainlink’s oracles. There are many oracles operating today, including ones that provide price data across a wide range of assets, weather data, and location data.
LINK is the token used to pay for services on the network and to incentivize nodes to perform verifiably honest work and provide accurate data.
Keep in mind: In order to become a node and start providing data to Chainlink oracles, holders must stake LINK tokens into a smart contract to act as an incentive against misbehaving or submitting false data to the network.
Released: September 2018
Compound is a decentralized lending protocol that allows users to deposit crypto assets to earn APY rewards, and to borrow other crypto assets against that collateral. It’s part of the growing suite of DeFi apps that primarily run on the Ethereum blockchain.
How it works:
When you supply an asset to Compound, you immediately begin receiving interest on that deposit. A borrowing limit is then determined, based on the value of the collateral you’ve supplied.
When you deposit funds into Compound, you receive a special cToken in return. For example, if you deposit USD Coin into Compound, you’ll find cUSDC in your wallet — and when you withdraw your USDC, the cUSDC will disappear from your wallet. (cUSDC can also be held, transferred, and traded just like any other token.)
The yield on the crypto you deposit into Compound currently comes in two forms: interest in the form of cTokens and rewards in native COMP token. The interest rate for each Compound market is dynamic and based purely on supply and demand.
Holders of COMP tokens also get to vote on the future of the protocol itself, enabling Compound to operate in a fully decentralized way.
You can connect your crypto wallet to Compound at https://app.compound.finance
Keep in mind: In traditional finance, the model of supplying one asset to borrow another is called “over-collateralized lending.” It can help investors to gain exposure to more markets and enable advanced trading strategies like leveraging borrowed crypto to invest in other assets (but keep in mind that there are risks associated with collateralized lending, including potentially losing your collateral).
Released: March 2019
Cosmos aims to be the “internet of blockchains” by allowing developers to build their own blockchains, each of which are interconnected via the Cosmos network. ATOM is the native cryptocurrency, used for staking and securing the “Global Hub,” which connects all of these blockchains.
How it works: The main idea of Cosmos is to allow for faster and cheaper decentralized applications — anything from an NFT marketplaces to decentralized exchanges — by allowing them to run on their own dedicated blockchains.
All of these independent blockchains (called “zones”) are interconnected by the Inter-Blockchain Communication protocol, or IBC.
Cosmos also provides developers with prebuilt modules that allow them to quickly create blockchains that are completely customizable for their specific use case.
The Cosmos consensus engine, IBC protocol, and software developer kit are designed to enable ease of use and interoperability between chains, while maintaining the security and transaction cost and speed developers would expect from other leading blockchain platforms.
Keep in mind: You can earn rewards by staking ATOM via Coinbase.
Released: January, 2014
When Dash — the name combines Digital and Cash — was first launched, its developers’ focus was on total user privacy and anonymity. (In fact, for a while it was called Darkcoin.) But in recent years, the mission has evolved towards positioning the currency as a useful method of payment for daily transactions, although it does still offer strong encryption and privacy features.
How it works: Dash uses a unique consensus mechanism that isn’t quite like Bitcoin’s proof of work or like Cardano’s proof of stake (even though it is based on staking).
Instead of requiring transaction confirmation from all of the network’s nodes, special validators called “Masternodes” can instantly verify a transaction.
Each Masternode is incentivized to be honest because they must have at least 1,000 of their own DASH staked. This staked DASH can be “slashed” if the Masternode validates an improper transaction.
In exchange for doing the work of verifying transactions, Masternodes earn rewards.
Keep in mind: Dash is designed to be also self-governing and self-funding, which helps position DASH as a sustainable and useful cryptocurrency for sending and receiving payments.
Released: December 2013
For most of its existence, Dogecoin (pronounced “dohj coin”) was considered to be an amusing “memecoin” beloved by its community — but with relatively little value. That changed in 2021, when DOGE became one of the larger cryptocurrencies by market cap — with a total value that has topped $50 billion, even though each individual coin is worth pennies.
Abundance is a key part of the idea — Dogecoin was created as a fun, low-stakes Bitcoin alternative. As soon as it was launched in late 2013, it began attracting an enthusiastic online community that famously once used DOGE to help send the Jamaican bobsled team to the 2014 Winter Olympics in Sochi.
Keep in mind: Unlike Bitcoin, which is designed to be scarce and resistant to inflation, Dogecoin was created to be abundant. There are about 130 billion DOGE circulating, and miners produce another 10,000 every minute.
Enjin Coin (ENJ)
Released: July 2018
Enjin is an ecosystem that aids in the creation and management of virtual goods, better known as NFTs. It provides tools for building and selling unique digital items. The Enjin platform aims to give users access to the true ownership of their digital collectibles and allow easy trading.
How it works: The ENJ token is the platform’s native currency. When a new NFT is minted on the network, a chosen amount of ENJ is minted into the token. The locked funds give the newly built goods real world value, as each item can be at any point melted back into the underlying ENJ backing.
The Enjin platform also provides software developer kits (SDKs) that equip developers with tools to build their own NFTs on the Ethereum blockchain and enable their integration into the gaming ecosystems or apps of their choice.
The platform also maintains its own native NFT marketplace and a wallet with NFT support.
Keep in mind: NFTs created with Enjin use a standard called ERC-1155, which was developed by Enjin’s team and is distinct from the more common ERC-721 standard pioneered by the NFT art project Cryptopunks.
Released: July, 2017
EOSIO aims to be an alternative to Ethereum. It provides blockchain infrastructure for decentralized applications, acting as a “blockchain computer,” and allows developers to create, deploy, and host their own smart contracts and decentralized apps (or dapps).
How it works: EOSIO claims to be able to support thousands of dapps without experiencing any negative network effects like high fees or slow confirmation times, thanks to innovations like parallel processing. This may be appealing for commercial developers and financial institutions looking to adopt blockchain technologies for large-scale use cases.
The network’s native token, EOS, is used to power transactions and applications on the blockchain, and can be staked for a reward in a consensus model called Delegated Proof of Stake (DPoS.)
Keep in mind: EOSIO was created to be easy for developers and end-users to adopt, with a specific focus on the pain points faced by developers of blockchain applications today – particularly those of speed, scalability, and flexibility in program design.
Released: October 2020
Filecoin (FIL) is a cryptocurrency that powers the Filecoin network, which is a decentralized, peer-to-peer competitor to cloud storage products like Dropbox or Amazon Web Services. Data stored via Filecoin is distributed across the entire network — as opposed to traditional centralized-server storage.
FIL tokens are used as both payment for using and supplying storage services as well as an economic incentive to ensure files are stored reliably over time.
How it works: Filecoin aims to provide a faster, cheaper, and more reliable distributed infrastructure for storing and retrieving data. It functions as a marketplace where developers can rent storage space — similar to a traditional cloud storage. But instead of trusting one provider with your files, they’re split up and served by a globally distributed network of computers.
The Filecoin network uses two types of miners — storage miners, who store the data, and retrieval miners, who supply the bandwidth used to retrieve the files.
The communication between clients and the network happens via two types of “deals”: storage and retrieval deals.
In a storage deal, the client chooses a miner to store their data and locks up the funds necessary to pay for storage. Once the agreement is accepted, the file is transferred and stored by the miner. The miner provides continuous proof of storage to the chain in order to receive rewards from the funds locked up by a client. If they fail to provide a proof (or if proof is delayed) the miner gets penalized.
In a retrieval deal, the client makes a payment to a retrieval miner to extract the data from the network. (Retrieval miners can also be storage miners, but they don’t have to be.) These deals are executed “off-chain” — using micropayment channels to reward miners for data retrieval.
Keep in mind: Anyone with a compatible computer can start mining FIL by becoming a storage provider, making their hard-drive space available for use by the network in return for rewards. Mining configurations can range from a single desktop computer to a large-scale server farm.
The Graph (GRT)
Released: January 2019
The Graph is a decentralized and open-source protocol for indexing and querying blockchain data. GRT is the Ethereum token that fuels The Graph’s ecosystem. It’s used to pay participants on the network that contribute by submitting or verifying data.
How it works: Much in the way search engines index the web, The Graph aims to index blockchain data within networks like Ethereum and Filecoin. This data is grouped into open APIs called subgraphs that make it easy for developers to query the data via the GraphQL API. By making data accessible, The Graph provides decentralized finance (or DeFi) applications like DEXs the data they need to operate effectively.
Indexers stake GRT tokens in exchange for the right to process queries, choose subgraphs to be indexed, and earn APY rewards for doing that work.
Curators help by validating the quality of subgraphs on the network.
Keep in mind: Indexing requires a large contribution of GRT and technical knowledge — but anyone can delegate some GRT to an Indexer and receive a cut of their query and indexing rewards.
Released: October, 2011
Litecoin is one of the oldest cryptocurrencies. It was created as a fork of Bitcoin in 2011 and offers faster transaction times and lower costs.
Keep in mind: Litecoin’s speed and relatively low fees make it appealing as a payment option and means of transferring value, but the network has significantly fewer miners than Bitcoin, which has negative effects in terms of overall network security.
MakerDAO (MKR, DAI)
Released: December, 2017
MakerDAO is a decentralized organization built on the Ethereum blockchain that runs a DeFi platform that allows users to lend and borrow crypto. Its native token is a stablecoin called DAI. DAI is an ERC-20 token, which means it runs on the Ethereum blockchain. It is designed to maintain a stable value of one US dollar. MKR is a governance token issued to users of MakerDAO DeFi services. It gives holders a say in the future of the organization.
How it works: MakerDAO works through a process called “overcollateralization”, where assets supplied by users are locked up in smart contracts as collateral in exchange for newly created DAI tokens.
The MakerDAO DeFi lending platform works via a collection of smart contracts that allow users to supply and borrow cryptocurrencies without a centralized loan provider.
Users create DAI by depositing some of their crypto into a smart contract on the platform. Once DAI is created, it functions as a token on the Ethereum blockchain that can be transferred between wallets to facilitate the transfer of value like any other cryptocurrency. DAI is useful as a medium for transfers because each token always aims to be worth one U.S. dollar — which means the value won’t swing wildly during the duration of the transaction. This type of stable cryptocurrency is known as a stablecoin.
Funds deposited to create DAI can be instantly re-acquired by paying off the DAI loan plus any fees.
Keep in mind: MakerDAO was the first DeFi protocol to reach a total value locked (or “TVL”) of $1 billion in 2020.
Released: December, 2019
What is OXT With digital privacy and censorship growing as concerns for people around the world, VPN services (“Virtual Private Network”) have become a popular tool for privately and securely browsing the internet and interacting with online services.
Orchid is a crypto-powered VPN service that aims to extend the functionality of traditional VPN services with the security and anonymity benefits of blockchain technologies. OXT is an Ethereum token that serves as a secure means of paying for the use of Orchid's VPN service.
How it works: There are two categories of users in the Orchid network:
Bandwidth users are the customers who use the VPN. (It’s available for Android, iOS, and Mac.)
Bandwidth providers are Orchid Nodes that have staked OXT tokens in order to supply their surplus internet bandwidth to users. In exchange, they receive compensation in OXT tokens. The more OXT staked, the greater the chances for a reward.
Bandwidth providers are required to stake OXT to give them incentive to behave responsibility.
But you don’t need to be a full bandwidth provider to benefit from staking OXT. Any holder of OXT can stake some of their tokens in a pool with a full bandwidth provider.
Keep in mind: Orchid aims to provide a distributed network of trusted, high quality bandwidth providers, allowing users to access the internet privately, and instead of relying on relying on one centralized VPN service.
OMG Network (OMG)
Released: July, 2017
Purpose: OMG was designed to be used by businesses and DeFi apps to create systems that use a blockchain to transfer value between various digital and fiat currencies, and to create financial tools and services that are fast, cheap and secure.
Built on top of the Ethereum blockchain, OMG intends to integrate with other blockchain networks and traditional payment providers to allow businesses to transfer value from one blockchain to another, or to transfer funds between blockchains and traditional payment settlement companies like Visa and Swift.
How it works: Formally known as OmiseGo, OMG is a layer-2 Ethereum scaling solution designed to be integrated into mainstream wallets. It works on top of the Ethereum blockchain to allow users to transfer Ethereum tokens faster and more cheaply than transferring them on the Ethereum blockchain directly.
OMG holders can also stake some of their tokens, which helps the network stay secure. When you stake some OMG, you earn a percentage of the overall fees that the OMG Network generates from end users.
Keep in mind: OMG claims to be “currency agnostic.” Fees remain the same no matter which currencies are and blockchains are involved in a given transaction. This feature could be particularly useful for payment processors and financial institutions.
Stellar Lumens (XLM)
Released: July, 2014
Stellar is a blockchain payment platform originally launched as a hard fork of the Ripple network in 2014. Created by the nonprofit Stellar Development Foundation, XLM aims to connect businesses and financial institutions around the world via blockchain — allowing them to quickly settle payments and make low-cost currency exchanges.
How it works: XLM (or Lumens), fuels activity on the Stellar network. The Stellar network is a system designed to help payments cross borders (and currencies) much faster and more cheaply than with traditional financial-system networks.
For example, a bank in Japan might use Stellar to send money to a bank in Mexico. Stellar would automatically convert yen to XLM, send the payment via blockchain, and reconvert XLM to pesos at the best current exchange rate.
Stellar was intended to work alongside existing assets and cryptocurrencies, allowing users to create digital representations of any asset as a Stellar token. These can then be used to transact on the blockchain, and can be redeemed at any time for the base asset.
Keep in mind: XLM is positioned to be particularly useful in developing markets, where it aims to serve as a low-cost bridge for cross-border transactions — allowing users to send and receive payments in their preferred currency. In early 2021, the Ukrainian government selected Stellar as its partner in the development of a national digital currency.
Released: August 2020
SushiSwap is a decentralized exchange (or DEX) built on the Ethereum network. Originally forked from Uniswap, SushiSwap leverages smart contracts in order to provide liquidity pools that allow users to directly trade crypto assets — with no intermediary. Users can also become liquidity pool providers, supplying an equal value pair of two cryptocurrencies in order to receive rewards whenever anyone utilizes that pool. It is a decentralized finance (or DeFi) protocol.
How it works:
You can use Sushiswap to trade one cryptocurrency for another directly — it can’t be used to trade fiat for crypto or vice versa. It uses the Automated Market Maker model pioneered by Uniswap.
You can connect your crypto wallet to Sushiswap at https://app.sushi.com/
To add liquidity, users send equal-value amounts of two cryptocurrencies to SushiSwap. In exchange, they receive Liquidity Provider (or LP) tokens and begin receiving rewards.
Users can deposit their newly created LP tokens into yield farms to earn further APY rewards. This creates extra incentive for users to continue to be part of the liquidity pool over time.
Keep in mind: Users of Ethereum-based apps like SushiSwap have to pay transaction fees (also called gas) that can vary widely in price and can make it expensive to use the network. DEXs have a range of risks, so do your research. “Impermanent loss” can result from pairing a more volatile cryptocurrency with a less volatile one in a liquidity pool. Bugs in smart contracts can be exploited. And anyone can create a token, so watch out for “rug pulls.”
Released: February 2018
Synthetix is a crypto protocol that allows users to create crypto assets called Synths that track the price of other assets — anything from stocks and commodities to “index fund”-like baskets of assets or other cryptocurrencies.
Synthetix also allows investors to buy and sell Synths, potentially making it possible to gain exposure to a huge range of investment opportunities without the need for a traditional brokerage account, bank, or fund manager.
How it works: The platform allows users to create synthetic assets called Synths on the Ethereum blockchain. Synths, in the form of ERC-20 tokens, track the value of their underlying assets. The price data is fed acquired from Chainlink oracles (see the Chainlink entry in this guide).
To create new Synths, users provide collateral in the form of SNX — the platform’s native token. SNX holders are also incentivised to actively participate in maintaining the health of the system via staking.
Keep in mind: Synths can provide exposure to the underlying asset’s price, but investing in a Synth isn’t the same as owning the asset itself — for one, you don’t gain any of the voting rights that shareholders may receive.
Released: June, 2018
Tezos is a blockchain network and smart contract platform similar to Ethereum. Using Tezos, developers can create decentralized applications (lending apps, decentralized exchange apps, and much more).
Tezos’s mission is to create a “self-amending blockchain.” In this model, all upgrades and changes to the protocol are managed on-chain through decentralized governance.
That governance is managed entirely by the community. XTZ is the governance token that gives holders a say in future decisions about how Tezos should evolve.
How it works: Voting on proposed changes and upgrades to the protocol is conducted via a process called “baking”, in which users lock up XTZ tokens to secure governance rights. This process is a form of Proof of Stake.
Bakers can also earn rewards for submitting proposals that are successfully implemented.
Keep in mind: Tezos was among the first projects to incorporate go “fully decentralized”, allowing token-holders to vote on changes to the protocol that would automatically be integrated by smart contract, drastically reducing the chances for disputes and hard forks. It launched off of the back of record-breaking $232M token sale in 2017.
USD Coin (USDC)
Released: September, 2018
A new class of cryptocurrencies called “stablecoins” have their price fixed to a reserve asset (often the US dollar) at a one-to-one ratio. USDC, as its name would suggest, is one such dollar-pegged cryptocurrency. Each USDC is guaranteed to be backed by a dollar in a bank. Its goal is to make crypto payments via the blockchain more reliable by reducing price fluctuations.
How it works: Cryptocurrencies are now used to make payments, to engage with decentralized services and tools, and to store value. But they tend to have a trait that limits their day-to-day usability: volatility. Even Bitcoin, which has seen less volatility compared to its earliest years, moves too much relative to fiat currencies to be a comfortable everyday currency for most users.
By providing assurances that token holders can redeem one USDC for exactly one US dollar at any time, the potential for price speculation is significantly reduced – resulting in a crypto asset that maintains a fixed value.
USDC is an Ethereum token and can be used to facilitate blockchain payments and transfer of value in the context of Ethereum smart contracts. This allows users to keep cryptocurrencies in a wallet, ready to send to a friend or interact with decentralized financial tools and services, and with minimal any exposure to the risk of their holdings falling in price before they get a chance to spend them.
Keep in mind: USDC is a stablecoin built by Centre, a consortium of which Coinbase and Circle are the founding members. Each USDC token is backed by one US dollar held in a bank, enabling the stablecoin to maintain a 1:1 exchange rate with the US Dollar.
Released: November 2018
Uniswap was the one of the first decentralized finance (or DeFi) applications to gain significant traction on Ethereum. Since then, numerous other decentralized exchanges have launched (including Curve, Sushiswap, and Balancer), but Uniswap remains among the most popular. As of April 2021, Uniswap had processed over $10 billion in weekly trading volume. Uniswap allows users anywhere in the world to trade crypto without an intermediary (but doesn’t allow for crypto-fiat trades, or vice versa). Users can also become liquidity pool providers, supplying a pair of two cryptocurrencies in order to receive rewards whenever anyone utilizes that pool.
UNI is a governance token that allows holders to vote on key protocol changes.
How it works:
Uniswap pioneered the Automated Market Maker model, in which users supply Ethereum tokens to Uniswap “liquidity pools” and algorithms set market prices (as opposed to order books, which match bids and asks on a centralized exchange like Coinbase) .
You can connect your crypto wallet to Uniswap at https://app.uniswap.org/
By supplying tokens to Uniswap liquidity pools, users can earn rewards while enabling peer-to-peer trading.
Anyone, anywhere, can supply tokens to liquidity pools, trade tokens, or even create and list their own tokens (using Ethereum’s ERC-20 protocol).
There are currently hundreds of tokens available on Uniswap, and some of the most popular trading pairs are stablecoins like USDC and Wrapped Bitcoin (WBTC).
Keep in mind: One issue users of Ethereum-based apps like Uniswap face are transaction fees (also called gas) that can vary widely in price and can make it expensive to use the network. Multiple solutions to this issue are in the works, from the long-planned transition to the ETH2 blockchain (scheduled for sometime in 2022) to the nearer-term rollout of a “Layer 2” scaling solution called Optimism later this year. Uniswap developers are confident that Optimism will allow for significantly cheaper Uniswap transactions.
In early May 2021, Uniswap v3 launched with the goal of making transactions faster and cheaper.
DEXs have a range of risks, so do your research. “Impermanent loss” can result from pairing a more volatile cryptocurrency with a less volatile one in a liquidity pool. Bugs in smart contracts can be exploited. And anyone can create a token, so watch out for “rug pulls.”
Released: July 2020
YFI is an Ethereum-based token that powers Yearn.finance — which is designed to simplify the process of depositing funds into DeFi projects. DeFi typically requires a fairly high degree of technical knowledge. Yearn.finance (or yEarn) aims to solve this by creating a simple, streamlined portal via which less technically-skilled users can access DeFi platforms. Think of it as a “robo-advisor” of sorts.
How it works yEarn aims to be a sophisticated “yield farming” automation tool with a streamlined interface. It automatically moves funds supplied by investors between the liquidity pools of various DeFi projects via smart contract, in order to achieve the highest possible return for investors.
It also enables investors to use automation to drive decisions about which projects they should invest their funds into in order to get the best deal possible and maximize their profits.
Keep in mind YFI is a governance token, which means that holders are able to vote on changes to the protocol’s structure or operational model. It has only been rarely distributed to users, but existing YFI can be bought or sold like any other cryptocurrency.
Released: October 2016
ZEC is known as a “privacy coin” due to its focus on anonymity for users and the transactions they make on the ZCash blockchain. It was developed by cryptography experts to address what they saw as privacy issues with the Bitcoin network.
How it works: ZCash enables a range of public and private transaction types. Public addresses can send “shielded” transactions to private addresses, or transactions can either be fully private or fully public. ZCash makes use of Zero-Knowledge proofs (or “zk-SNARKS”) in order to keep information about the sender, receiver, and the transacted amount private whenever a “shielded” ZEC transaction is made. An optional “Memo” field can also be filled in whenever a user makes a payment. This field can only be accessed by the recipient, which could prove useful for a number of interesting use cases across the FinTech and DeFi spaces.
Keep in mind: The Zcash protocol was designed to evolve in-line with the needs of the community over time. Governed by the Zcash Improvement Proposal process, ZCash token holders can vote towards proposed changes and upgrades to the protocol.