All You Should Know About MakerDAO, Uniswap, Compound, Curve, Aave And Yearn Finance (YFI)
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Decentralized applications (DApps) have been growing in popularity since 2020, with web3 projects such as Uniswap and Illuvium causing widespread ripples in the markets. Many of these projects are hosted on the Ethereum blockchain, and they run through DApps. In this article, we’ll look at some of the best DApps and web3 projects to use with your Bybit Wallet.
What Is a DApp?
A decentralized application (DApp) is a software application that runs on a blockchain. Unlike internet-based applications, DApps don't need a centralized database to function. They run on Ethereum, but they also operate on other blockchains that generate smart contracts, such as EOSIO and TRON.
There are many types of DApps. Some include decentralized finance (DeFi), GameFi and NFT.
What Is the Bybit Wallet?
Bybit Wallet is a web3-compatible custodial wallet that aims to provide users with easy access to various DApps on the Bybit Web3 Portal.
With the Bybit Wallet, you can discover all sorts of DeFi DApps, NFT collections, GameFi programs and more. To create your own Bybit Wallet, sign up for a Bybit account, and click on Connect Wallet. As a trusted crypto exchange that prides itself on next-level reliability, Bybit aims to provide a seamless experience that doesn’t require you to have a seed phrase. Bybit will hold the private key to your wallet, and with Bybit’s industry-grade security, rest assured that your funds will be kept safe. Some of the benefits of having a Bybit Wallet are:
- Cross-chain compatibility
- Private key management
- Airdrop management (digital assets collected automatically for you on the blockchain)
- Access to NFT marketplaces
- Access to DeFi products (swaps, earning and lending)
- Decentralized identity management
After your Bybit Wallet is set up, head over to the Bybit Web3 Portal to view all compatible DApps. As Bybit aims to equip its readers with web3 knowledge, they can click on each DApp and view its respective background information. Bybit also offers guides and tips to read up on for web3.
Now that you know how to create your Bybit Wallet, let’s explore the best DApps that will be compatible.
Best DeFi DApps to Use With Bybit Wallet
MakerDAO
MakerDAO was launched on the Ethereum blockchain in 2017. It’s a lending platform on which users can borrow the stablecoin Dai, which is pegged to the U.S. dollar. The key to MakerDAO's success as a lending platform has been its decentralization.
As with all DApps, MakerDAO has no borders. People around the world can use it. No one is subject to identity or credit checks, as they would be if they used a lending service through a bank. As its currency, Dai (symbol: DAI) uses cryptocurrencies as collateral, including ETH and any other Ethereum-based asset approved by MKR holders.
The cryptocurrency is locked until a user repays the loan and any incurred fees. Once they do, the collateral, ETH for example, will be released. However, if the ETH price drops below the price at which it was acquired, it will be sold off to pay the Dai that has been borrowed, plus any penalties. These liquidations, or the threat of them, help to stabilize the governance of the MakerDAO system.
Uniswap
Uniswap, a decentralized exchange (DEX), allows anyone to participate in the transactions of ERC-20 tokens without the governance of a centralized body or intermediary. It gives permissionless access to financial services, thus staying true to the decentralized ideals of the Ethereum blockchain.
Since Uniswap is based on the Ethereum blockchain using smart contracts, it replaces traditional exchange functions — for instance, order books with their own automated and permissionless liquidity pools executed by algorithms. These liquidity pools are pairs of ETH and ERC-20 tokens exchanged by traders. On Uniswap, users are incentivized to provide liquidity to these pools by being rewarded with a trading fee share. In other words, when users supply liquidity, they’re given liquidity provider (LP) tokens that track how much liquidity they contributed.
This method of providing liquidity eliminates the need to rely on market makers. One advantage of using Uniswap, or other DEXs, is that they're inexpensive. They also require minimal maintenance because they’re hosted on a blockchain.
Compound
Compound, another borrowing and lending DApp built on the Ethereum blockchain, allows users to borrow and lend cryptocurrency from each other. All transactions are conducted through a smart contract protocol. Lenders can earn interest from cryptocurrencies by adding to the liquidity pool. To do so, users must first connect an Ethereum wallet, such as MetaMask.
Compound tokens are called cTokens. If a user deposits ETH, they’re given cETH in return. Likewise, if a user deposits USDT, they receive cUSDT in return. The cTokens allow users to track the value of the assets they’ve lent, as well as the interest accrued.
While interest from each token will fluctuate, depending on the supply and demand of its native cryptocurrency, it’s still more than the interest offered by a traditional savings account. And Compound, like other DApps, doesn’t require identity checks; it also offers lower transaction fees. Moreover, the risks in borrowing are minimal, as assets are overcollateralized (a security measure in which borrowers put forward more assets than is needed as collateral).
Curve
Curve is a DEX that quickly became popular. Like Uniswap, it uses automated liquidity pools. But unlike Uniswap, it’s explicitly designed to exchange stablecoins and Bitcoin-backed ERC-20 tokens, such as Wrapped Bitcoin (WBTC). Therefore, its maintenance costs are lower, and so are its fees.
Curve’s interface isn't designed for the mainstream user, as its use is so specific. Hence, not too many investors or traders want or need to exchange stablecoins. Just as with Uniswap, users can earn rewards for adding to the liquidity pool. Curve is also popular with yield farmers because of its high use of stablecoins in yield farming.
Although Curve's creators claim the lack of assets that can be exchanged increases its operating efficiency, the fact that you can only exchange stablecoins (and Bitcoin-backed ERC-20 tokens) can also be a disadvantage, at least from a user's standpoint.
dYdX
Unlike other DEXs based on the Ethereum blockchain, dYdX lets you lend, borrow and trade cryptocurrencies on margin. The two types of margin trading are isolated margin and cross-margin.
Besides margin trading, users can lend assets to accrue interest and conduct regular asset trading. Some minimal miner-taker fees apply to trading.
Furthermore, users can earn interest by lending assets to other users. As with other lending DApps, the risk to the lender is low because of over-collateralization. For borrowing, the minimum collateralization ratio on dYdX is 125%.
Aave
Aave is another borrowing and lending DApp built on the Ethereum blockchain. Its users can lend their assets, and earn interest in the process. To do this, they must connect their Ethereum wallet to the DApp in a process similar to Compound’s.
However, Aave distinguishes itself from the rest through its additional flash loan feature. Practically speaking, these loans are valid for one blockchain transaction, allowing for uncollateralized debt. How is this possible?
The transaction is reversible at any time if the loan isn’t repaid. Assets for flash loans are sourced from smart contract pools. The interest rates on Aave for flash loans are at only 0.30%. And flash loans pave the way for arbitrage opportunities. The way it works, traders can get a loan, make an arbitrage trade, then pay back the loan and any accrued interest.
Yearn Finance (YFI)
Yearn Finance, launched in July 2020, is one of the newer kids on the block, and one of the most popular DeFi DApps. Yearn is a yield aggregator that automatically searches DeFi DApps on the Ethereum blockchain for the best yield returns.
The YFI token saw remarkable price rises after being launched at $739. Over the course of two months, its price shot up rapidly, reaching over $43,000 by September 2020. Analysts chalked it up to the confidence those in the DeFi space have in Yearn Finance, which has an expanding array of products.
Vaults, its main product, enables users to deposit their cryptocurrency and earn yields in return. It employs more complex strategies to get yields than Earn, the first product of Yearn Finance, which is how the term (“yEarn”) was born.
Synthetix
Synthetix allows users to speculate on the price of real-world assets — currencies, stocks and precious metals — as well as other crypto assets, with ERC-20 tokens. The tokens, known as synthetic assets (or “synths), can track the assets' prices.
As with MakerDAO, whose users need to lock up ETH as collateral to create its stablecoin, Dai, users on Synthetix need to lock up Synthetic Network Tokens (SNX) as collateral to create the platform's native stablecoin, Synthetic USD (sUSD).
To acquire the real-world information of the assets' prices, Synthetix has teamed up with Chainlink and its oracle technology to provide decentralized price feeds.
Source: 18 Best DApps & Web3 Projects to Use With Bybit Wallet | Bybit Learn
