In the past year, the total value locked of decentralized finance services (DeFi) in the cryptocurrency space soared from $9 billion to a staggering $217 billion. More than ever, investors are migrating from using everyday personal finance services with their banks to those powered by cryptocurrencies.
Hence, there’s never been a better time to invest in DeFi tokens. The fastest emerging ones right now include Kava (CRYPTO:KAVA) and dYdX (CRYPTO:DYDX). They are up 1,322% and 2,303% since their inception in October 2019 and September 2021, respectively.
dYdX is a margin, derivatives and futures trading protocol created on the Ethereum blockchain (ERC-20). You simply need to connect your wallet to the platform to enjoy up to 5 times leverage for crypto trading. What’s more, dYdX is one of the first decentralized exchanges (DEX) to provide perpetual futures trading — which are contracts that enable buying and selling of the underlying asset at a pre-determined price with no expiration date. With this setup, users can keep their positions forever as long as they have enough margin power to hold them through asset price fluctuations.
Last March, there was little to no trading activity on the dYdX platform. However, by now, its cumulative trading volume has grown to an astonishing $89.1 billion. Over 9 million futures are currently active on the exchange. By the way, dYdX has also grown to become the most popular DEX globally, with $2.9 billion worth of crypto exchanging hands on Oct. 12 alone. That amounts to a market share of close to 25%.
As with stocks, the dYdX token enables coinholders to vote on protocol updates developers put forth, giving stakeholders a say in the future of dYdX. In addition, like many DEX tokens, one can stake dYdX to provide trading liquidity and earn rewards. Over $851 million worth of tokens is locked away for such a purpose. For these reasons, it’s a promising token that you don’t want to miss out on.
Similar to how peer-to-peer borrowing/lending hubs such as Aave dominate the Ethereum blockchain, Kava brings that service to the Cosmos (CRYPTO: ATOM) blockchain. Once users connect their wallets to the Kava platform, they can deposit their crypto and take out a stablecoin loan. This ensures that investors’ assets can still appreciate while having the cash needed to pay for everyday expenses. Because of Cosmos’ internet of blockchain technology, users can deposit a variety of crypto, such as Binance Coin, Kava, etc as collateral to receive the loan.
Interest rates for stablecoins vary between 0.16% and 14.75% per year. So it’s a better deal than paying back credit cards or taking out a personal line of credit at a bank. But that’s not all: Similar platforms on ERC-20 are plagued by high fees required to execute borrowing/lending smart contracts. That’s right: It can cost over $100 right now to borrow the funds and the same again to repay each installment. Luckily, it costs as little as 0.001 Kava ($0.006) to execute the agreement.
Speaking of the token, like dYdX, Kava holders can also vote on proposed governance changes to the platform. In addition, it functions as the reserve currency of the system. When there isn’t enough collateral to back loans or stablecoins, Kava can help meet that requirement. So the more the token goes up, the more capital that could be lent out and the greater the revenue. Definitely check out this promising token, which is still flying under the radar.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.