How the 18 DeFi assets OKCoin is exploring for listing function in the DeFi ecosystem and why we chose them
Decentralized finance (DeFi) provides open and inclusive financial opportunity, and in recent months has taken the crypto industry by storm. At OKCoin, we’re working to propel the adoption of crypto and usher in a future of decentralized finance by supporting high-quality assets.
On Monday, September 14th, we announced that we’ve been actively reviewing 18 DeFi assets for listing on our platform. On Wednesday, September 16th, we announced three of those assets were listed for trading: COMP, DOT, and YFI.
Outlined in previous blogs, the value of DeFi tokens and value of cryptocurrencies locked in DeFi protocols has skyrocketed. A key reason for this boom are so-called yield farming opportunities, which can offer opportunities to earn interest on their assets by purchasing, staking, and using certain tokens — from Wrapped Bitcoin and Curve to Synthetix and Yearn.finance — in a variety of Ethereum protocols.
- OKCoin has been actively reviewing 18 assets and just listed COMP, DOT & YFI, with more coming soon
- These 18 assets were selected because of the quality of the projects behind them, their functionality within DeFi, and direct requests from OKCoin customers
- The utility of the DeFi assets under review fall into six categories: decentralized exchange tokens, money-market tokens, yield farming tokens, oracles, trading, and DeFi-focused blockchains
- OKCoin is one of the first licensed exchanges to support these assets with USD pairings for US and global customers
- Watch for further DeFi announcements in the coming weeks
The 18 assets under review and the projects behind them
To summarize, the assets currently under review are: Algorand (ALGO), Ampleforth (AMPL), Balancer (BAL), Curve (CRV), Kava (KAVA), Kyber Network (KNC), Aave (LEND), Chainlink (LINK), MakerDAO (MKR), Ren (REN), Synthetix (SNX), Solana (SOL), Serum (SRM), Universal Market Access (UMA), WrappedBTC (WBTC). Compound (COMP), Polkadot (DOT), and Yearn.finance (YFI) are listed.
Here are the six categories of DeFi ecosystem utility:
1. Decentralized exchange tokens
Core to the DeFi ecosystem are decentralized exchanges (DEXs), which facilitate the trustless transfer and listing of new tokens. Most DEXs have governance tokens that are given to people who use the exchange, who can then influence the direction of the protocol.
Balancer is a decentralized exchange that operates on an automated market maker (AMM) system, where there is no order book. Instead of an order book, there is constant liquidity that is priced along a curve, meaning one can always exchange a token for another, no matter what the price. Any Ethereum token and pair can be listed and traded on the platform.
Balancer is controlled by the BAL governance token, which was launched just months ago as a necessary step to achieve “decentralized and [diverse] governance.” The team behind the platform tout the token as a medium for users to “help guide the protocol to its fullest potential.”
Along with being purchased on exchanges, BAL can also be earned by using the Balancer protocol.
Curve is a decentralized exchange that also operates on an AMM system. What sets Curve apart from Balancer is that the curve of the AMM, which determines slippage (the difference between the expected price of a trade and the price at time of trade execution), and its focus on two sets of cryptocurrencies: US dollar stablecoins and tokenized Bitcoin. Curve’s AMM is structured so there is minimal slippage. Trading fees are also lower on Curve compared to competitors like Balancer and Uniswap.
Curve is governed by holders of the Curve DAO Token (CRV). The mechanics of Curve’s governance model are much more complicated than that of other protocols, but holders have the ability to adjust fees, rewards, tokens supported by the exchange, and other factors.
Kyber Network is a decentralized exchange focused on sourcing liquidity from a “wide range of reserves,” enabling cheap, instant, and on-chain exchange of tokens. The platform gains an edge over basic decentralized exchanges because of its ability to aggregate liquidity, thereby allowing users to get the best rate on their trades.
Kyber Network Crystals (KNC) is a token that has a number of utilities within the protocol. Liquidity reserves are required to pay KNC fees to the protocol. The token can also be staked to be used in Kyber’s new governance module, which yields voters KNC over time.
Synthetix is a decentralized exchange that allows users to gain on-chain exposure to any asset class through synthetic assets. Synthetic assets are assets that emulate the exposure of a certain market. For instance, there is sXAU, which is a token — or “Synth,” in Synthetix terms — that tracks the value of one ounce of gold.
Core to Synthetix is the Synthetix Network Token (SNX), which can be used to create sUSD and other synthetic assets within the Synthetix ecosystem. The founder of Synthetix once dubbed himself the “inventor of modern agriculture,” as since its launch, users of Synthetix have received yields in SNX.
Serum is an order book-based decentralized exchange being built on the Solana blockchain, which will be mentioned later. Backed by the founders of Compound, FTX, and other firms in the space, Serum is attempting to one-up Ethereum DEXs by enabling faster transfer times and cross-blockchain swaps, sometimes called atomic swaps. Serum also has its own US dollar stablecoin, SerumUSD, and a tokenized Bitcoin, SerumBTC.
SRM can be used to give users up to 60% off trading fees. Large amounts of Serum, numbering in the millions of tokens, can be staked in nodes to optimize the performance of the network. Each week, fees from the network are used to buy back SRM, which is then burned.
Ren is a decentralized exchange that allows users to transfer tokens between blockchains. Currently, holders of bitcoin, bitcoin cash, and zcash can get tokenized versions of their holdings on Ethereum by depositing it into Ren. The project intends on expanding support for coins and blockchains in the future. The idea is to connect other coins to the DeFi ecosystem.
REN is used as a bond to run Darknodes, which are the backbone of the Ren Network. Darknodes, which require a minimum of 100,000 REN to launch to maximize security, earn rewards for contributing to the network.
2. Money-market tokens
Another key aspect of the DeFi ecosystem are on-chain loan providers, sometimes called money markets, where users can obtain cryptocurrency by depositing collateral. This allows users to leverage their holdings. Most money markets have their own governance coin. These tokens often tend to be the most prominent in the DeFi market.
As covered in a previous blog, MakerDAO is the “OG” of DeFi protocols, being one of the first to gain traction in the Ethereum ecosystem. It is a decentralized loan provider where users can deposit different cryptocurrencies — including Ethereum, Wrapped Bitcoin, and USD Coin — in exchange for the DAI stablecoin, which is pegged to $1 through monetary policy. MakerDAO is controlled by holders of the Maker (MKR) token. MKR token holders can change monetary policy, meaning changing the interest rate loan holders pay, the coins accepted as collateral, etc.
MKR also acts as a contributor in the MakerDAO ecosystem due to a burn mechanism, where tokens are bought back, then burnt to help the coin accrue value.
Aave, previously known as ETHLend, is a money-market protocol that allows users to lend and borrow a variety of cryptocurrencies. For instance, one can deposit Ethereum as collateral, then withdraw USD Coin to farm yields. Aave is expanding beyond money markets, offering “flash loans,” a type of on-chain loan where one can deposit and return tokens in a single block, and on-chain art/collectibles called Aavegotchis.
LEND, named after the former name of the protocol, will soon be a governance token that “defines a set of policies by which the Aave Protocol and money markets abide by.” LEND will also soon have a staking function that will allow users to receive incentives; the LEND staked will act as “collateral of last resort” in the Aave ecosystem.
Similar to Aave, Compound offers users the ability to lend and borrow a swath of leading cryptocurrencies. The protocol is backed by notable investors such as Andreessen Horowitz (a16z), Bain Capital Ventures, Paradigm, and Polychain Capital.
Compound is governed by holders of the COMP token, who have the ability to adjust interest rates curves, supported tokens, and other factors of the money market. A reason why COMP is so significant is that many believe the coin ushered in the ongoing DeFi phenomenon of yield farming. The token launched in June, where lenders and borrowers were distributed COMP on a pro-rata basis, and since then, yield farming has been the trend to watch in crypto.
Kava is a new DeFi money-market protocol focused on offering loans and stablecoins “against all major assets” and across multiple blockchains. Currently, users can put up collateral to receive the USDX stablecoin, which acts similarly to MakerDAO’s DAI. USDX can be staked, distributing a yield to users. Kava is built on the Cosmos Network, which operates through a Proof of Stake consensus mechanism, not mining like most other blockchains.
Similar to MakerDAO’s MKR, Kava is governed by holders of the KAVA token, who can adjust the monetary policy of the protocol. And similar to Aave’s LEND, KAVA also acts as the collateral of last resort if the Kava ecosystem is undercollateralized.
3. Yield farming tokens
There are DeFi applications dedicated to allowing users to obtain the highest risk-adjusted yield on their deposits. Many of these apps have a governance token, which can be used to influence the direction of the protocol.
Yearn.finance has rapidly become the most valuable and publicized DeFi protocol since the launch of the YFI governance token. Yearn.finance is a protocol whose primary focus is to maximize the yield one earns on deposits of Ethereum-based cryptocurrencies. The protocol is currently expanding to offer on-chain insurance and a decentralized exchange.
The YFI token governs the protocol. Holders are allowed to create proposals that determine the direction of any aspect of Yearn.finance. Decisions are then implemented by the protocol’s developers if approved.
YFI has received much coverage recently due to it being the first fairly-launched token since Bitcoin, some analysts have said. The token was farmable by users of Yearn.finance through a pro-rata system. What’s especially fascinating about YFI’s story is that the token began trading at $3 and now trades for over $30,000.
Oracles are technologies that link off-blockchain data — be that the price of a stock or the outcome of an event — to a blockchain network. Oracles have integrated their own cryptocurrencies as a way to incentivize usage and raise capital. Oracles are crucial in DeFi, as on-chain apps need to connect to off-chain data feeds.
Chainlink is a network that connects real-world data, events, and payments to blockchains — largely DeFi protocols. The technology “provides a reliable connection to external data that is provably secure end-to-end.”
LINK is the Ethereum-based cryptocurrency that is used to pay for services within the network. Contracts that need to connect to off-chain data must pay LINK to request data from Chainlink node operators. LINK is also staked by node operators to incentivize good service.
Universal Market Access
While an oracle protocol, Universal Market Access is also a protocol allowing users to create and settle derivatives for any underlying asset. As the project’s website reads, “using concepts borrowed from fiat financial derivatives, UMA defines an open-source protocol that allows any two counterparties to design and create their own financial contracts. But unlike traditional derivatives, UMA contracts are secured with economic incentives alone, making them self-enforcing and universally accessible.”
UMA is a governance token that can be used to vote on protocol decisions and to challenge the reference index of a market, thereby ensuring the contract settles properly. UMA is especially notable in DeFi because it launched by listing on Uniswap as opposed to an initial coin offering. The idea there was to allow any user to participate in the launch of the coin.
5. Trading tokens
These are DeFi tokens whose primary purpose is to facilitate crypto trading.
Ampleforth (AMPL) is what many in the DeFi space describe as a “money experiment.” Based on Ethereum, the AMPL token has a “rebasing” mechanism that constantly adjusts the supply of the coin to try to ensure that one token is worth $1. Every day, the number of tokens is either increased or decreased to normalize the price; an increase in supply should decrease the value of each coin and a decrease should increase the value of each token.
The project was founded by former engineers, academics, and investors that previously worked at firms like Google and Uber. Ampleforth also counts Pantera Capital, Spartan Group, and Coinbase’s Brian Armstrong as investors.
Wrapped Bitcoin (WBTC) is a tokenized version of Bitcoin based on Ethereum. The idea is to allow users to maintain their exposure while simultaneously interacting with the DeFi space. The bitcoin to back each WBTC coin is held by BitGo, a leading custody provider in the crypto space. WBTC issuance is also regulated and “KYCed” to ensure the security of funds. Wrapped Bitcoin is an initiative sponsored by Kyber, Ren, and BitGo.
An example use case for WBTC would be to use it to provide liquidity through Curve, which as aforementioned, is a decentralized exchange with a focus on tokenized Bitcoin and stablecoins. Curve’s tokenized Bitcoin pools currently yield upwards of 40% per annum in CRV.
6. DeFi-focused blockchains
A series of blockchains focused on DeFi are being launched — and unsurprisingly, they have their own coins.
Algorand is the “first pure Proof of Stake” blockchain that “provides the necessary security, scalability, and decentralization needed for today’s economy.” Algorand supports smart contracts, standard assets, and atomic transfers, thereby enabling DeFi transactions to take place.
ALGO is the native token of the Algorand network. It can be staked by holders to generate a yield paid out in ALGO.
Polkadot is a blockchain focused on connecting multiple blockchains into a cohesive network. Polkadot is a sharded multichain network, allowing a large number of transactions to be processed on several chains in tandem, eliminating some bottlenecks in terms of transaction throughputs.
The network is governed by DOT holders, which can change fees, add or remove Polkadot parachains, amongst other decisions. Validators can stake DOT to new parachains, then are rewarded participation rewards.
Solana is touted as a web-scale blockchain for “fast, secure, scalable, decentralized apps and marketplaces.” The network’s biggest benefit is its ability to process over 50,000 transactions per second, which outpaces Ethereum’s transaction cap of around 15 to 24 per second. Solana is predicated on eight key innovations, which allow for high transaction throughput while maintaining decentralization and security.
All fees on the Solana network are paid in SOL, which will be burnt over time. The deflationary mechanism is meant to entice users to stake their coins, which increases security while also netting users extra SOL over time.
As the DeFi ecosystem continues to expand, so do our listed offerings on OKCoin. With COMP, DOT, and YFI, OKCoin is one of the first licensed exchanges to support these assets with USD pairings for US and global customers. We look forward to adding support for more tokens soon; watch for further DeFi token listing announcements in the coming weeks.