DeFi protocols were the high performers of the last bull market. They accounted for the bulk of the liquidity in the crypto market and also attracted new users to crypto with their reward-earning schemes.

Protocols such as Synthetix and Compound Finance were two of the biggest DeFi leaders. And although DeFi protocols have suffered greatly from the bear market, we expect things to turn around once the bull run sets in.

The crackdown on centralized exchanges is another reason to believe in DeFi. Both crypto users and investors have turned their attention to DeFi protocols as a better alternative to centralized exchanges, showing how beneficial DeFi is to the future of finance.

As mentioned earlier, Synthetix and Compound saw heavy adoption in the last bull market. Synthetix’s SNX token currently trades at $2.12. But its all-time high of $28.53 came during the last bull run.

Looking at the token’s current price might be discouraging, but that’s all because of the bear market. In a bull market, projects like Synthetix and Compound see heavy adoption and price surges because they have good fundamentals. Let’s examine both projects.

What is Synthetix?

The Synthetix Network provides crypto users with a chance to bet on real-world assets. The Ethereum-based project enables its users to trade synthetic assets, or “synths.” These synths are tokens that mimic the value of real-world assets like cryptocurrencies, commodities, and fiat currencies.

The Synthetix network leverages smart contracts to automate the management, trading, and issuance of synths. The whole idea of this project is to provide a decentralized and trustless way for users to access different assets without needing third parties or intermediaries.

Furthermore, the Synthetix Network uses a multi-token structure based on a system of fees, inflation, staking, and collateral. There are two primary tokens on the platform:

  • SNX: serves as the native token
  • Synthetic assets, or Synths.

What makes Synthetix unique?

The Synthetix system gathers data, such as the price of the Japanese yen and conventional stocks like Tesla. It gets this data without relying on a central party. Instead, it uses Chainlink’s decentralized oracle technology.

Another unique feature of this platform is that users can trade any synth for another synth on the Synthetix platform. So, this feature provides an almost infinite level of liquidity.

The Synthetix network simply wants to make trading easier. So, it supports a system where Synths holders can either bet on the price of an asset rising or falling by going long or short on it.

Also, holders who stake SNX can mint new synths, receive rewards, and increase their earnings.

Synthetix has really good fundamentals and a unique proposition. It allows people to access real-world assets. Anyone with a good internet connection and an SNX token can access this service. In addition, Synthetix doesn’t mandate KYC for trade like traditional platforms.

Synthetix also solves the problem of slippage and liquidity. These are two common issues in the DeFi space. However, Synthetix does not require third parties to facilitate trade between synths on the platform. This way, it solves the issue of liquidity and slippage.

We can conclude that the future looks bright for this network. Synthetix has successfully brought traditional finance to DeFi, making it one of the most innovative DeFi projects.

Compound Finance

The concept of borrowing and lending has existed for a long time and is now an essential part of the finance industry. However, it wasn’t always easy to link borrowers and lenders. But Compound Finance is one of the DeFi protocols that improve traditional borrowing and lending while maintaining the fundamental notions of decentralization.

Compound Finance is a permissionless DeFi lending platform that enables lenders to generate interest from their crypto holdings. It holds deposited assets in liquidity pools, which are smart contracts. Then, interest rates are algorithmically changed based on supply and demand.

Compound uses smart contracts to automate the issuance of loans and the calculation of interest rates. This way, it removes the need for middlemen. 

Once a user makes a deposit, Compound issues a new cryptocurrency known as cToken (which represents the deposit) to the lender. You can transfer or trade each cToken. But you can only redeem them for the crypto initially locked in the protocol. 

Compound incentives the entire process of lending with its COMP token. So, users receive COMP tokens when they interact with the Compound market, either by borrowing or withdrawing. The COMP token also gives voting rights to its holders. This means they get to take part in core decisions on the network. 

While there are some limitations to Compound Finance such as its complexity, it has good fundamentals, which make it a worthy investment. Some of the pros of this platform include

  • No slippage or trading fees
  • It is community-governed.
  • There are no imposed minimums on lending or borrowing.

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The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers, and their risk tolerance may be different from yours.

We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence. This article has been sponsored by BYDFi.

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