New DeFi сoins: top three projects with realistic valuations
09:55, 10 June 2021
The decentralised finance (DeFi) ecosystem has grown into one of the most promising and growing segments in the crypto space, reaching a total gross value locked of almost $100bn at the beginning of May, according to data from The Block - even as the valuation of cryptos as a whole has been progressively deflating.
Many tokens have surged in value as advocates of DeFi continue to see these networks and platforms as pioneers of a paradigm shift that will revolutionise the financial industry.
Considering this sector’s growth, and given the latest downtick in the value of cryptocurrencies, opportunities for investors seem likely. To help you identify some promising tokens and projects we’ll look at the best new DeFi coins to keep an eye on in 2021.
Before we get to that, let’s summarise some of the aspects that make DeFi such a promising part of the crypto space.
What is DeFi and why should you consider investing in DeFi coins?
DeFi is short for decentralised finance. The DeFi ecosystem is a parallel of the traditional financial industry that uses decentralised networks and smart contracts to remove the middle-man from processes like lending, borrowing, asset exchanges and investing.
Some DeFi protocols, such as Uniswap (UNI), Chainlink (LINK), and Maker (MKR), have grown to become some of the largest tokens in the crypto space by market capitalisation.
Advocates of DeFi believe these protocols will eventually serve as feasible substitutes to financial institutions, brokerage firms and banks. Users will be able to transact with each other without having to pay an intermediary.
That said, although the ecosystem is promising due to its real-life application, it’s still in its infancy. There are opportunities for investors to potentially identify the next big DeFi coin by analysing several new projects.
Top three new DeFi coins
Kyber Network (KNC)
The Kyber Network is promoted as DeFi’s “liquidity layer”. The protocol offers rewards for liquidity providers in the form of spreads earned when different tokens are exchanged through Kyber.
Because DeFi is a remarkably new ecosystem, low liquidity often results in high levels of price volatility, which opens up the possibility of manipulation by deep-pocketed players.
To solve this limitation, the Kyber Network serves as a middle-man connecting sell-side liquidity with buy-side liquidity to increase flows.
Kyber Network is an on-chain liquidity protocol that aggregates liquidity from different sources to ensure fast and secure transactions on any decentralised application (DApp).
Since its inception in July 2020, the KNC token has surged 155%, currently trading at $4.217 a coin. Interestingly, the total supply of KNC will be progressively burned, which should result in higher prices over time if demand for the token remains constant or high. The maximum total supply of KNC is set at 226 million tokens. The progressive burn will occur every time a trade is made through the Kyber Network.
According to data from Wallet Investor, the KNC token could reach $3.87, based on an analysis of the coin’s latest price action and trend.
Serum (SRM)
Serum is a decentralised exchange built on Solana (SOL), a protocol similar to ethereum (ETH) that powers smart contracts. It was developed by FTX, a well-reputed exchange that offers access to derivatives, including options, volatility products, and futures contracts for cryptocurrencies.
A decentralised exchange is powered by smart contracts and algorithms. They’ve become a low-cost alternative to centralised peers. Serum in particular offers fast execution times and low transaction fees of $0.00001 per trade – a value proposition that makes it one of the most promising upcoming DeFi coins, especially due to the platform’s appeal to high-frequency traders and market makers.
All fees paid by traders on the Serum network are used by the system to buy and burn (B&B) SRM tokens. By burning these tokens, supply is progressively reduced. In a scenario where demand remains unchanged or progressively increases, lower supply should eventually lead to a higher price for the token.
The SRM token was introduced back in August 2020. During its first trading session, SRM rose from $0.110 to as high as $1.550. It soared to $13 per coin at some point in early May before settling at $4.2 per coin as of 9 June 2021 - the fall part of the latest negative momentum seen by cryptocurrencies as a whole.
According to projections from Wallet Investor, the price could go up to $14.64 a coin over the next 12 months based on an analysis of the latest price action and trend.
Dodo (DODO)
Dodo aims to change the way market makers and exchanges work by introducing an innovative protocol known as Proactive Market Marker (PMM). Most exchanges, including the popular Uniswap (UNI), follow an Automated Market Maker (AMM) protocol that uses liquidity pools to perform trades.
Under this protocol, the market maker sets prices by following a certain algorithm and trades can be immediately executed through the liquidity provided by these pools. But this approach has its flaws, including high levels of slippage and impermanent losses.
Dodo aims to minimise these disadvantages by introducing its proprietary PMM protocol, which uses oracle-guided algorithms to optimise trades, reserves and other crucial variables of market-making while opening the door to professional market makers and retail investors to execute their strategies without the restrictions often imposed by other protocols.
The DODO token was launched on 1 April 2021, making it one of the latest DeFi coins released this year. Since then its value has declined 66.5% as the developing team revealed that hackers were able to steal a total of $3.8 million from some of the project’s Crowdpools.
A total of $1.89 million was returned by one of the hackers, revealed as a “white-hat” hacker – an individual who infiltrates networks to identify flaws in order to help developers improve coding and prevent further attacks.
The remaining funds have not been recouped and the situation has hit the project’s credibility. However, DODO’s value proposition is still quite interesting and, at its current market capitalisation of $155m, the upside potential remains big so long as the developing team can prevent further unauthorised intrusions.
According to Wallet Investor, the DODO token should reach a value of $8.15 in a year, based on an analysis of the latest price action and trend.
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