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10 Best DeFi Crypto Projects to look into in 2021 and Their Tokenomics

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Editorialist

Last updated March 6, 2021

Estimated Reading Time:
15 minutes, 14 seconds

Most people thought that DeFis met their peak in October 2020. Yet, the crypto bull run revitalized the initiative, and the race for the best DeFi crypto project has even more potential winners.

New capabilities, improved tokenomics, and filling the gaps of 2020’s DeFi projects – these are just a few of the things we will see in 2021. And although there are hundreds of projects going on, we will showcase 10 you should really keep an eye on.  

What is DeFi?

What is DeFi

DeFi, short for Decentralized Finance, refers to a crypto sector that works to bring most of the traditional finance’s capabilities inside the cryptocurrency space. It does that by disassembling the various financial services and decentralizing them.

DeFi projects usually denominate dapps and infrastructure such as asset management tools, decentralized exchanges (DEX), DeFi infrastructure & Dev Tooling, and many others.

Although they are risky to invest in and use right now, the more time passes, the more they optimize and come out with better tokenomics

What are tokenomics?

What are tokenomics

Tokenomics represent the economics of a token or a coin. They are determined by many factors usually described in the whitepaper, and users can track them on websites such as CoinMarketCap.com or CoinGeko.com. 

Let’s quickly go through these factors as we will need them later in the article. 

Supply 

The first thing to consider while evaluating the potential of a cryptocurrency is the supply. Namely – the circulating supply, the total supply, and the max supply.

  • The circulating supply is the number of tokens that are already in circulation.
  • The total supply is the number of tokens that already exist, minus the burned tokens.
  • And the max supply represents the maximum number of tokens a cryptocurrency will have. Sometimes the max supply is the same as the total supply, and sometimes there is no max supply.

Also, most projects come out with only 10-20% of the tokens in circulation, unlocking more down the road.

If the circulating supply is increased at a steady pace, the token can increase in value over time. However, a flood in the circulating supply can drown the token’s value.

Market cap

The market cap (market capitalization) represents the total amount of funds invested in the cryptocurrency.

The higher the market cap and the lower the circulating supply, the more valuable a token will be.

Yearn.finance is a perfect example of a high market cap/low supply that translates into a huge token value.

Allocation & Distribution

Fair launch or pre-minted?

Fair launch refers to cryptocurrencies that were collectively mined by people, like Bitcoin. As for pre-minted, it refers to projects where a select few minted the tokens before they were made available to the public.

SIDENOTE: Most DeFi related projects come with pre-minted tokens, which isn’t necessarily bad as long as the distribution is fair.

In both cases, you have to look into distribution across addresses. If there are large accumulations in the network, there is a constant danger of those wales dropping their cryptocurrency and crushing the price.

Use a block explorer to check how well distributed the cryptocurrency is.

Ideally, a cryptocurrency project should distribute their token as much as possible to as many users as possible.

Vesting & Inflation

Vesting & Inflation refers to the management of the cryptocurrency over time from an economic perspective. 

Vesting refers to the unlocking and allocation of tokens over time and applies to pre-minted cryptocurrencies. Crypto projects usually publish a vesting schedule, and usually, it should take place over many years. 

But, if you see a project unlocking a vast number of tokens over a short period, the cryptocurrency is likely to depreciate quickly.

When it comes to inflation, cryptocurrencies can be inflationary or deflationary. Inflationary cryptocurrencies increase their total supply periodically, while deflationary cryptos cut the total supply in certain circumstances. 

In terms of tokenomics, inflation or deflation should not affect a cryptocurrency’s price in the short run but encourage its use.

Utility

Perhaps the most critical tokenomics fact in driving and maintaining a cryptocurrency price is the utility of its token/coin. It goes from staking to store of value, to paying fees, to voting, and more. 

The more utility a token has, the more established the cryptocurrency will be in the future. 

The best example of utility driving the price is in Ethereum’s case. As Ethereum is the most used environment by dapp developers, ETH, which is used mainly for paying network fees, has a high value and the second-largest market cap in the crypto market.

10 Best DeFi Crypto Projects

10 Best DeFi

Many dapps in the crypto space need oracles to interact with different kinds of data. And the current leader in oracles is Chainlink.

Chainlink offers a decentralized data set through a series of oracles and smart contracts, providing a middle ground between real-world data and blockchain applications.

Since 2019, Chainlink grew exponentially, providing over 75 price feeds to 300 smart contracts and decentralized applications. 

It’s important to notice that Chainlink as a project was developed and evolved to the point that it’s giving grants to crypto initiatives deemed useful to the ecosystem.

In the DeFi space, Chainlink makes a significant impact by facilitating other projects with oracles to ensure their functionality. 

A few examples of notable projects using Chainlink oracles are Synthetic, AAVE, KyberSwap.

Supply

  • Max Supply: 1,000,000,000 LINK
  • Total Supply: 1,000,000,000 LINK
  • Circulating Supply: 410,009,556 LINK

Market Cap

The LINK token has a market cap of around $12 billion (at the time of writing).

Allocation & Distribution

LINK tokens are pre-minted. Therefore, the Max Supply is the same as the total supply.

According to Etherscan, the total supply of LINK is distributed as follows: 

  • 35% locked in smart contracts
  • 41% In circulation
  • 24% allocated to node operators

Vesting & Inflation

It appears there is no vesting or lock-up schedule for LINK. 

Yet by checking the historical data on CoinMarketCap with WayBackMachine, it seems that Chainlink increases the circulating supply by 4-5% every year.

Utility

The LINK token has quite a few use cases, such as: 

  • in smart contracts
  • fees network 
  • staking

2. SYNTHETIX

Synthetix is one of the most hyped and fast-growing DeFis out there. It is a decentralized asset insurance protocol built on Ethereum. 

Synthetix allows users to mint synthetic representations of real-world assets as tokens that peg the value of the asset they are based on.

The synthetic assets maintain their peg through the principle of no-arbitrage (that allows stakers to burn additional synths) and the open market liquidity for synths on other decentralized exchanges.

Supply

  • Max Supply: 219,252,220 SNX
  • Total Supply: 215,258,834 SNX
  • Circulating Supply: 114,841,533 SNX

Market Cap

The SNX token has a market cap of around $2.5 billion (at the time of writing).

Allocation & Distribution

The SNX tokens are pre-minted, and according to Binance Research, the total supply of SNX will be distributed as follows:

  • 0.87% Pre-Sale
  • 19.20% Private Sale
  • 3.05% Public Sale 
  • 18.49% Team 
  • 0.77% Advisors 
  • 4.62% Foundation 
  • 1.93% Partnership Incentives 
  • 1.16% Bounties/Airdrops 
  • 49.92% Staking

Vesting & Inflation

The Synthetix token’s inflationary money supply schedule was introduced in March 2019 and showed a weekly 1.25 inflation rate decrease:

Period of time Increase in SNX Supply Total SNX Supply after inflation SNX inflation rate
2018. 0 100,000,000 0%
2019 75,000,000 175,000,000 75%
2020 37,500,000 212,500,000 21%
2021 18,750,000 231,250,000 9%
2022 9,375,000 240,625,000 4%
2023 4,687,500 245,312,500 2%

Utility

The SNX’ use cases are as follows:

  • Primary use is staking and collateralizing synthetic assets
  • Yield Farming
  • Trading Fees
  • Governance

3. DODO

Dodo is an on-chain liquidity provider that offers stability through a proactive market maker. The project was first developed on Ethereum as an ERC20 smart contract and expanded on the Binance Smart Chain.

Dodo offers more than a cute name and design by managing to provide sufficient liquidity comparable to some of the best centralized exchanges (CEX), making it usable by smart contracts for on-chain transactions such as liquidation and auctions.

Supply

  • Max Supply: 1,000,000,000 DODO
  • Total Supply: 1,000,000,000 DODO
  • Circulating Supply: 98,269,480 DODO

Market Cap

The DODO token has a market cap of $450 million (at the time of writing).

Allocation & Distribution

The DODO tokens are pre-minted, and according to Binance Research, the total supply will be distributed as follows:

  • 6% Seed Sale
  • 10% Private Sale
  • 15% Team & Advisors
  • 8% Operations & Marketing
  • 1% IDO Liquidity
  • 60% Reserved for the community

Vesting & Inflation

As for the DODO tokens’ release schedule, the circulating supply is meant to increase gradually to up to 100% of the total supply until the end of 2025.

  • At the end of 2021, the Circulating Supply will reach 40% of the Total Supply.
  • At the end of 2022, the Circulating Supply will reach 60% of the Total Supply.
  • At the end of 2023, the Circulating Supply will reach 80% of the Total Supply.
  • At the end of 2024, the Circulating Supply will reach 90% of the Total Supply.
  • At the end of 2025, the Circulating Supply will reach 100% of the Total Supply.

Utility

The DODO’s use cases are as follows:

  • Governance
  • Crowdpooling & IDO Allocation
  • Staking
  • Trading Fee Discounts
  • Minting vDODO

4. PANCAKESWAP

PancakeSwap is an Automated Market Maker Decentralized Exchange made on the Binance Smart Chain that requires no KYC. The project received fundings from Binance as a part of the company’s DeFi acceleration program on the Binance Smart Chain. 

In essence, PancakeSwap is a clone of UniSwap but also comes with a few new features: 

  • Two built-in yield farming tools in which you can stake liquidity provider tokens and earn cake or stake cake to earn more cake or other BEP20 tokens
  • Lottery tickets
  • An auction market for various NFTs
  • An initial farm offering
  • Gamification through the use of community teams, leaderboards, various tasks, and achievements 

Supply

  • Max Supply: No Limit
  • Total Supply: 204,622,436 CAKE
  • Circulating Supply: 126,888,576 CAKE

Market Cap

The CAKE token has a market cap of $450 million at the time (at the time of writing).

Allocation & Distribution

The BEP20 CAKE token is pre-minted, and according to BscScan, the distribution goes as follows:

  • 38.35% locked in the main staking contract
  • 38.41% wallet used for burning tokens
  • 23.24% allocated to various smart contracts and holders

Vesting & Inflation

CAKE has no max supply cap, and it functions with an inflation of 750,000 CAKE every day, even after the burning mechanisms are considered. However, the newly emitted tokens are distributed to Yield farmers (60%) and Syrup Pools (40%).

In terms of tokenomics, CAKE may seem to have disastrous inflation. However, the developers want the token to be deflationary, so they always work on the burning parameters.

Utility

The primary use of the CAKE token is staking. In addition, the token is also used for:

  • Crowdpooling
  • NFTs Auctions
  • Participation in various features of the PANCAKESWAP environment.

5. REN (REN)

REN is a decentralized interoperability protocol that wants to allow crypto users to transfer any token between any blockchain. The cross-chain value transfer solution does not create synthetic tokens or wrapped tokens but transfers liquidity from one ecosystem to another with existing smart contracts.

The concept of renBTC is similar to wBTC. The difference comes in the fact that unlike wBTC, the Bitcoin is kept on a network of decentralized nodes called the Dark Nodes and is governed by code in Ren’s case.

And because the REN protocol operates just like a machine, users can make as many requests as they want, when they want.

The Ren Virtual Machine can be integrated into many DeFis to provide them with liquidity and does not require KYC.

Ren VM’s impact is significant in the case of hodlers, allowing people holding Bitcoin to supply their funds to lending protocols and earn interest rather than keeping them idle.

Nodes earn fees in the cryptocurrency exchanged through the RenVM.

Those who want to operate a node need to acquire 100,000 REN to be able to do so.

Supply

  • Max Supply: 1,000,000,000 REN
  • Total Supply: 999,999,633 REN
  • Circulating Supply: 996,163,051 REN

Market Cap

The REN token has a market cap of around $1.1 billion (at the time of writing).

Allocation & Distribution

Ren was pre-minted as an ERC20 token, and according to Binance Research, it is distributed as follows:

  • 18.67% Bonded in the Dark nodes
  • 19.9% Reserve funds
  • 10% partnerships, development, and other related activities.
  • 56.6% investors and lending pools.
  • 13.5% other holders

Vesting & Inflation

Almost all Ren tokens are circulating, but the tokens used to bond are taken off the market. And as demand for operating nodes increases, more tokens will be bonded.

Utility

The primary use case is as a Bond to operate a dark node.

6. LITENTRY (LIT)

Litentry is a project that aims to develop a cross-chain identity aggregating platform. The platform will manage decentralized identities (DID) that are spread across multiple blockchains.

Litentry is meant to provide projects and protocols with a modular tool to manage and use DIDs privately and securely as an input for developing new features. 

The platform is built on Substrate, making the project natively compatible with Polkadot. Because of that, Litentry can be launched as a parachain on the Polkadot network. 

The DID management provided by Litentry will allow Dapps and DeFi projects to integrate operations such as confirming the users’ identity and credit record immediately and on-chain. 

Supply

  • Max Supply: 100,000,000 LIT
  • Total Supply: 100,000,000 LIT
  • Circulating Supply: 18,262,394 LIT

Market Cap

The LIT token has a market cap of around $150 million (at the time of writing).

Allocation & Distribution

The LIT tokens are pre-minted, and according to Binance Research, the total supply will be distributed as follows:

  • 3% Binance Launchpool
  • 8.11% Seed Sale
  • 11.89% Strategic Sale
  • 15% Team
  • 45% Parachain Auction & Ecosystem
  • 17% Foundation

Vesting & Inflation

The Lit Token release schedule shows a steady increase, displaying a reasonably moderate growth in the circulating supply up to 60% until November 2025.

Utility

The LIT token’s use cases are:

  • On-chain governance
  • Paying Fees: Transactions, Matching, Validation
  • Staking
  • Collateral in DeFi ecosystems
  • Incentive For developers

7. SWINGBY

Swingby is a warp-speed protocol that builds cross-chain bridges to move Bitcoin into WBTC. The project is not limited to BTC but is also thought to be a decentralized proof-of-stake network that allows users to move various tokens onto other chains without involving a central custodian.

Swingby helps BTC holders use their idle assets within DeFi ecosystems and aims to allow users to move their tokens out of Ethereum and onto chains with higher scalability and fewer transaction fees.

Supply

  • Max Supply: 1,000,000,000 SWINGBY
  • Total Supply: 1,000,000,000 SWINGBY
  • Circulating Supply: 115,775,921 SWINGBY

Market Cap

The SWINGBY token has a market cap of around $100 million (at the time of writing).

Allocation & Distribution

The SWINGBY token is pre-minted, and according to the company’s official medium channel, the token will be distributed as follows:

  • 33.6% Foundation
  • 30% Staking reserve
  • 17% Team
  • 8.5% Advisors
  • 5.9% Private sale
  • 4% Seed Sale
  • 1% Public Sale

Vesting & Inflation

When it comes to vesting and unlocking, the SWYNGBY token’s schedule shows an increase in circulating supply of 5 – 8% quarterly up until August 2025.

Utility

SWINGBY token’s use cases are:

  • Payment for network fees
  • Staking
  • Running a Metanode or pool liquidity

8. FANTOM

Fantom aims to become a DAG-based smart-contract platform using aBFT principles to achieve consensus. The platform will enable smart contracts in a directed acyclic graph-based system by using the Lanchesis protocol. 

And by using asynchronous Byzantine Fault Tolerance principles in the consensus mechanism, nodes do not need to be aware of the existence of all other nodes in the network when joining the network. This means that the network’s performance and scalability are highly improved.

What is unique about Fantom regarding the DeFi ecosystem is its unique consensus mechanism to facilitate DeFi and related services through smart contracts.

The Lanchesis mechanism is bound to offer two-second transaction finalization along with a more secure proof-of-stake algorithm.

Supply

  • Max Supply: 3,175,000,000 FTM
  • Total Supply: 2,545,006,273 FTM
  • Circulating Supply: 2,545,006,273 FTM

Market Cap

The FTM token has a market cap of around $1.5 billion (at the time of writing).

Allocation & Distribution

The FTM token is pre-minted and, according to Binance Research, is distributed as follows:

  • 3.15% Seed Sale
  • 37.04% Private Token Sale
  • 1.57% Public Sale
  • 7.49 Team
  • 12% Advisors
  • 6% Token Reserve
  • 32.75% Block rewards

Vesting & Inflation

The release schedule for the FTM tokens show a steady 1.1% monthly increase in the circulating supply until August 2023

Utility

The FTM token’s use cases are:

  • Staking
  • Paying network fees
  • Granting user rewards

9. POLKASTARTER

Polkastarter is a cross-chain protocol for pools and auctions that enable projects to raise capital in an environment based on Polkadot.

The most important thing to know about what makes Polkastarter promising is the ability to make both fixed swap pools and cross-chain swaps through the Polkadot ecosystem. This provides higher throughput and cheaper transactions while maintaining a connection with the Ethereum Network and other blockchains to keep liquidity flowing.

Supply

  • Max Supply: UNKNOWN
  • Total Supply: 100,000,000 POLS
  • Circulating Supply: 59,090,000 POLS

Market Cap

The POLS token has a market cap of around $300 million (at the time of writing).

Allocation & Distribution

According to Polkastarter’s documentation, the token is distributed as follows:

  • 10% Foundational reserve
  • 15% Seed Sale
  • 10% Team & Advisors
  • 27.5% Private sale
  • 15% Marketing Fund
  • 22.5% Liquidity Fund

Vesting & Inflation

After listing, the token supply will be unlocked with around 7% per month for 24 months.

Utility

The POLS token’s use cases are:

  • Governance
  • Transaction Fees
  • Staking
  • Liquidity mining

10. UMA

UMA (Universal Market Access) is a protocol for creating synthetic derivatives with trustless contracts on anything that has a price.

The protocol allows two counterparts to make a trade by structuring a trustless smart contract, eliminating the need for a broker, clearinghouse, or exchange. The self-enforcing smart contract automatically adjusts each side’s margin and makes sure that the trades are always collateralized.

Also, UMA is making itself remarked by reducing the use of off-chain oracle price feeds to eliminate the risk of oracle manipulation seen in many DeFi protocols.

Supply

  • Max Supply: 101,172,570 UMA
  • Total Supply: 101,737,209 UMA
  • Circulating Supply: 56,161,578 UMA

Market Cap

The UMA token has a market cap of around $1.2 billion (at the time of writing).

Allocation & Distribution

UMA tokens will be distributed as follows: 

  • 2% Initial Uniswap Listing
  • 14.5% Future Token Sales
  • 35% Developers and Users
  • 48.5% Founders, Early Contributors, and Investors

Vesting & Inflation

Although there is no unlocking schedule for the UMA token, we know that in terms of tokenomics, it has an inflation of 0.05% that increases the supply each time a vote is held. However, the platform also burns tokens to prevent profits from oracle corruption.

Utility

In terms of utility, the UMA token has the following:

  • Governing the UMA ecosystem
  • Disputes
  • Fees

Final Thoughts

In 2021, we see dozens of projects with amazing tokenomics and capabilities that revolutionize the Crypto space once again. 

We’ve chosen these projects as the 10 Best DeFi Crypto Projects to showcase the capabilities that are coming into the market and not as financial advice.

Therefore keep your eyes open for the best opportunities and never forget to do your own research. Because as it seems, we have not seen the last of what cryptocurrency and blockchain can bring to the financial world.

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