- Analyst predicts higher profits than Bitcoin in Aave, Uniswap, Maker, Yearn Finance, and other Ethereum DeFi protocols.
- Governance tokens of DeFi protocols will receive greater benefits in the crypto market rally.
Ethereum DeFi “has woken up,” said analyst Lark Davis in his latest video on the top 5 altcoins to buy in the current bull cycle. Although they have greater risks, Davis chose the projects with the ability to deliver the most rewards to investors looking to diversify their portfolio from the top market cap cryptocurrencies like Bitcoin. Davis said:
These so-called decentralized finance (DeFi) bluechips could also be some of the best holds during the bull run in terms of actually giving those higher gains while also being relatively safer plays compared to a lot of the smaller cap cryptocurrencies in the market which might give higher gains but are also higher risk.
This sector has a total value locked (TVL) of $22.5 billion, at the time of publication, DeFi protocols have seen a boom since mid-2020. With a dominance of 18.87% and a TVL of $4.25 billion, Maker recently regained the first position among the main DeFi protocols. Davis chose it as one of the best for its current TVL and for the improvements that will be introduced to the platform.
In addition to being able to deposit tokens as collateral for loans, Maker will allow invoices for shipments and music royalties to be used as collateral for a loan without having to follow a Know Your Customer (KYC) policy, according to Davis. Maker’s potential is “massive” because it will allow its users to deposit and tokenized “anything” as collateral to obtain a loan.
Rise of governance tokens in Ethereum DeFi
Davis was equally bullish on the second-largest TVL loan protocol, Aave. With $3.05 billion allocated to its smart contract, Aave made changes to its governance model with the launch of a token that seeks to encourage community participation. In that sense, Davis believes that the development of the protocol will bring great benefits to AAVE token holders.
Aave goes way beyond just simple lending and borrowing services, it is also the pioneer in technology like flash loans, it has recently introduced a credit delegation, they’ve got lots of other stuff in the pipeline coming. Aave is even working to crack into the mortgage market, with tokenized mortgages being able to be used as collateral for loans.
The Uniswap (UNI) and Synthetix (SNX) governance tokens present high-profit scenarios. The latter protocol has been consolidating partnerships with the aim of tackling “a trillion-dollar derivatives market”, according to the analyst. The price of SNX will be driven by the improvements that the protocol will implement and its adoption.
Uniswap, Davis said, has surpassed Coinbase in trade volume and is the “most popular” DeFi protocol in the ecosystem. UNI completed its issue period in November 2020, therefore, selling pressure on the token has decreased.
According to Davis’ prediction, the value of the token will increase when UNI is fully integrated into the platform in conjunction with an approximate 15% return per UNI token that users will receive for staking tokens.
Finally, investors will benefit from holding Kyber Networks (KNC) token because it is working on its interoperability like Yearn Finance, the protocol for “yield farming” created by Andre Cronje. On the increase of these last token, Davis said:
The YFI governance token is famous for being ridiculously expensive, but the token holders receive a percentage of fees made to the platform… now it’s too early to say how lucrative holding the YFI tokens will be in the long run but the market is currently betting that they will be worth a lot and that the cash flow will be significant.