4 Top DeFi Apps Operating on the Ethereum Blockchain

Let’s look at the top DeFi protocols operating on the Ethereum blockchain that allows users to earn passive income.

Aditya Raghunath

Author Bio Aditya Raghunath is a financial writer and equity researcher who has spent more than a decade exploring investing and personal finance. Recognizing how complex financial markets can feel to everyday investors, he turned to equity research and financial journalism to help readers make informed decisions through clear, data-driven analysis. His work has been featured on financial platforms including Benzinga, Barchart, TIKR, and TheStreet.com. Aditya focuses on helping investors identify resilient businesses with durable competitive advantages, strong cash flows, and the potential to compound wealth over the long term. Outside of financial research, Aditya enjoys travelling with his family, exploring new cultures, and following global economic developments. Education Master's degree in Finance and Marketing Areas of Expertise Canadian and U.S. equities, growth and value stocks, dividend investing, dividend sustainability, portfolio strategy, asset allocation, exchange-traded funds (ETFs), long-term compounding, macroeconomic trends, interest rates, inflation, and sector rotation. Social Media Profiles LinkedIn Favorite Investment Quote "The stock market is a device for transferring money from the impatient to the patient." — Warren Buffett

Published March 4, 2022 10:00 am EST

Despite the rapid rise of cryptocurrencies in the last two years, this asset class is viewed as a speculative one. The lack of regulation and high volatility associated with cryptocurrencies make it a viable investment for those with a high-risk profile.

While it’s quite easy to value stocks fundamentally, investors should try to analyze the underlying utility of the blockchain networks of digital assets.

For example, the primary reason for Ethereum’s (CRYPTO: ETH) spectacular rise since its launch in 2015 is the ability of its blockchain network to support smart contracts. The transactions for the smart contracts are validated using the ETH token, increasing its demand higher over time.

Here, we’ll take a look at the top decentralized finance, or DeFi, applications that run on the Ethereum blockchain.

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SushiSwap

A decentralized exchange, SushiSwap (CRYPO:SUSHI) offers a wide variety of passive-income opportunities for users. You provide liquidity to a staking pool and earn rewards in the form of the SUSHI token, which is currently valued at a market cap of US$805 million. Further, if you don’t want to participate in the liquidity provisions of staking pools, you will still earn income in the form of protocol fees.

The total value locked on the Sushi is US$1.94 billion, which means the TVL to market cap multiple is 2.40.

ShibaSwap

A decentralized exchange (DEX) part of the Shiba Inu (CRYPTO: SHIB) project, ShibaSwap was launched in July 2021. The exchange offers functionalizes similar to other DEX’s such as UniSwap, where you can trade tokens without the need of an intermediary. You can also take part in liquidity pools and stake your cryptocurrencies to earn passive income.

The ShibaSwap DEX also provides you access to buy and sell non-fungible tokens, or NFTs. Its market cap is around US$133.4 million while the total value locked on ShibaSwap is US$207 million.

Convex Finance

One of the most popular DeFi protocols in the world, Convex Finance provides the opportunity to earn trading fees without locking the CRV token. But users who want to stake their CRV tokens will be rewarded in the form of trading fees as well as a share of boosted CRV.

The total value locked on Convex Finance is US$8.7 billion, while the CVX token enjoys a market cap of US$1.9 billion.

Aave

Another open-source and non-custodial liquidity protocol where you can earn interest on deposits as well as borrow assets is Aave (CRYPTO: AAVE). With a market cap of US$2.08 billion, the AAVE token is the 54th-largest cryptocurrency in the world.

Lenders can earn interest after they deposit digital assets into liquidity pools. The borrowers use the staked assets as collateral to “take out a flash loan” by leveraging this liquidity. Users holding the AAVE token will benefit from discounted platform fees. AAVE also serves as a governance token where token owners can contribute towards the development of the protocol.

The Foolish takeaway

Cryptocurrency staking platforms such as the ones mentioned above allow users to create a passive-income stream. However, you should also understand that the returns will be provided in the form of the staked token, the prices of which continue to remain volatile.