DEFI

The award for the best-performing DeFi token of 2021 goes to a surprising winner that is not on Ethereum!

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The award for the best-performing DeFi token of 2021 goes to a surprising winner that is not on Ethereum!

In 2020, decentralized finance (DeFi) projects on the Ethereum blockchain emerged as the top-performing sector in the market. As we move into 2021, DeFi projects continue to excel, but the spotlight has shifted away from Ethereum.

The Best Performing DeFi Tokens of 2021

According to the 2021 Q1 Market Performance Report released by cryptocurrency data provider Messari, the two best-performing DeFi cryptocurrencies in the first quarter of 2021 were PancakeSwap (Cake) and Terra (LUNA).

PancakeSwap is a decentralized exchange (DEX) running on the Binance Smart Chain (BSC). The rapid increase in transaction fees on the Ethereum network has forced many retail users to migrate from the Ethereum ecosystem to the more efficient and cost-effective BSC ecosystem. As the largest trading platform on the BSC network, PancakeSwap naturally became the biggest beneficiary. Since the beginning of this year, the price of the token CAKE issued by PancakeSwap has risen by 3,031%, making it the highest gainer among all DeFi concepts.

Terra has also risen in 2021 as an independent financial ecosystem outside of Ethereum. Its financial services include stablecoin issuance, synthetic assets, peer-to-peer lending, among others. The skyrocketing price of its token LUNA mainly comes from the benefits of staking. Besides being able to participate in node validation to earn LUNA rewards, staking tokens also have the opportunity to receive airdrops of tokens from new projects within the Terra ecosystem, providing significant incentives for investors. Since the beginning of the year, the token has risen by 2784%.

Ethereum's Issues Give Room for Competitors to Develop

While most mainstream DeFi protocols are still choosing to build on Ethereum, the significant rise in Ether prices, coupled with the increasing on-chain transaction demand, has forced developers and users to seek alternative solutions outside, while investors are also looking for other investment opportunities in these solutions. Messari stated in the report:

"The Binance Smart Chain has rapidly become the most commonly used smart contract platform after Ethereum, providing a low-cost alternative for those participating in liquidity mining."

Matt Aaron, co-founder of UniWhales, a data platform tracking Uniswap on-chain transactions, also mentioned in an interview:

"The emergence of PancakeSwap is directly related to the high transaction fees on Ethereum, which have made it inaccessible for most people. Do Kwon (founder of Terra) and his company are building a carefully designed ecosystem where the value of all ecosystems flows back to the LUNA token, with top-notch UI/UX, governance, and incentive measures."

Ethereum is currently working on launching ETH 2.0, which is expected to improve the transaction processing speed of the Ethereum blockchain. However, it may take several more years before its official implementation. In the meantime, how many more DeFi competitors will rise, competing for market share in the DeFi space within the Ethereum ecosystem?