Top DeFi Protocols To Use 2025

DeFi protocols are revolutionizing the finance industry. They give people a decentralized alternative that enables lending, borrowing, trading, and earning interest without relying on a third party—like a bank. Let’s explore the best and most innovative DeFi protocols shaping the ecosystem right now.

Maker is considered the decentralized finance (DeFi) OG. Launched in 2017, the project helped transform how people use DeFi Lending Platforms. The Maker protocol allows you to take out loans and use your cryptocurrency as collateral. So you receive DAI, the native token, in exchange for locking up other cryptocurrencies on the platform. 

You can also go one step further by locking your DAI in a smart contract to earn interest through the DAI Savings Rate (DSR). This helps the MakerDAO, one of the top Decentralized Autonomous Organizations, adjust to the demand for DAI on the platform and create a stable monetary policy. It enables community governance through its governance token.

Why Did We Choose Makerdao?

Maker’s pioneering approach to stablecoin creation, decentralized governance token, and crypto-backed loans makes it a cornerstone of the decentralized finance ecosystem.

The biggest appeals are features like over-collateralization to guarantee loan security and the options of fixed or variable interest rates. Its stability and robustness, even during turbulent crypto market conditions, have established it as a trusted platform for storing and borrowing funds. 

dYdX protocol is a top decentralized exchanges (DEX) for advanced traders. Since its 2017 launch, it has stormed through the DeFi space thanks to derivative trading features such as perpetual contracts and margin trading. Adding to this, you can access spot trading for over 133 crypto assets with low fees and deep liquidity.

It’s ideal for anyone looking for anonymous, trustless trading. Plus, the competitive fee structures, gas-free trading, lending, and borrowing are other big ticks. dYdX also leverages StarkWare for robust security, minimizing transaction costs, boosting productivity, and enabling community governance vision.

Why Did We Choose dYdX?

Compared to competitors, dYdX is a DeFi project offering a lower level of collateralization, making it more accessible. The platform’s commitment to decentralization and user governance provides users with incredible control and transparency. All in all, it has grown to become the leading derivatives DEX on the Ethereum blockchain – that’s no mean feat.

Aave is a multichain DeFi lending protocol. It first launched as ‘ETHLend’ on Ethereum but has since rebranded and branched out to Avalanche, BNB, and Polygon, among others. The platform connects crypto borrowers and lenders directly. It hosts a wide range of stablecoins and altcoins and gives borrowers the option of variable or stable rates.

Uniquely, it introduced flash loans, enabling you to borrow without collateral for a single transaction. Lenders can earn interest by depositing crypto assets into Aave’s liquidity pools and become liquidity providers. 

Why did we choose Aave?

Over the years, Aave has attracted significant liquidity to cement its place in the decentralized finance world. The total value of funds locked in the platform regularly exceeds $10 billion. The platform’s business model is straightforward: Offer yield to lenders, charge a higher interest rate, and the difference is the protocol’s revenue. Simple and sustainable to operate.

Lido Finance is a liquid staking solution that has emerged to solve teething problems in the DeFi staking game. Launched in 2020, Lido enables you to stake cryptocurrency and earn interest while retaining liquidity in your assets. This enables you to participate in securing proof-of-stake networks without losing the ability to use your tokens in other DeFi applications. 

When you stake an asset, you receive liquid staking tokens, such as stETH, in exchange. You can then use those staking tokens for yield farming elsewhere in the DeFi community. By enabling ETH staking on other chains, Lido has also become a popular Solana DeFi Project. 

Lido is the learning liquid staking protocol by TVL – There’s over $20 billion in value locked to the protocol. Its user-friendly design makes it easy for newbies to access liquid staking on Ethereum, Polygon, Solana, and Polkadot.

The key difference from competitors is the upgradable and adjustable voting mechanism. This allows Lido to implement governance structure changes while keeping all platform functions intact.

Uniswap is one of the oldest and most famous decentralized exchange protocol. Launched on Ethereum, it was an early adopter of the Automated Market Making (AMM) model to disrupt centralized exchanges. Now, it operates across several major blockchains, including Polygon, Avalanche, Binance, and more.

You can exchange cryptocurrencies, create tokens, and enjoy rewards. It is a community-centered protocol, relying on users to deposit tokens into the liquidity pool. Then, these contributors receive a slice of the protocol fees as a reward for their liquidity. 

Why did we choose Uniswap?

Uniswap gained a ‘first mover’ advantage in the DEX space but its simplicity and efficiency in token swaps is what makes it the go-to DEX. Its continuous innovation including concentrated liquidity in v3 keeps it at the front of decentralized crypto trading platforms.

Compound offers a decentralized lending and borrowing platform, but things operate a little differently here. The protocol uses a unique algorithmic interest rate that adjusts based on supply and demand. So, the rate of interest you earn for lending or pay for borrowing adjusts to market conditions. You receive cTokens for depositing Ethereum or ERC-20 tokens. This stake in the lending pool continuously accrues interest over time.

Why did we choose compound?

It’s innovative and user-friendly making it accessible to newcomers and experienced DeFi users. The COMP governance token allows holders to have a say in protocol decisions which seems to be fostering a strong community. The cherry on top is the live-interest rate delivering some of DeFi’s most competitive rates.

EigenLayer is spearheading the addition of restaking to the DeFi landscape. It introduced the concept of restaking – staking assets across multiple networks simultaneously. For investors, it helps juice extra profits out of funds compared to conventional staking. In simple terms EigenLayer lets you take ETH staked with Ethereum and then restake it with other Ethereum scaling blockchain solutions. 

Why did we choose EigenLayer?

EigenLayer has generated a real buzz in the DeFi community – quickly gaining 250k+ followers on X. It’s gobbled up over $16 billion in Ethereum deposits in its first year. 

Its staking concept promises to diversify risk, increase rewards, and strengthen the overall security of the staking ecosystem. Many laud it as a major leap forward for crypto security.

The crypto and DeFi industry carries an inherent risk as it sits outside of traditional finance and economic structures. But one thing is for sure: the crypto world likes to solve its own problems with innovation. Nexus is a decentralized insurance protocol built on Ethereum. 

Since 2017, it has been providing community-driven insurance. Currently, it offers coverage against contract failures, exchange hacks, and similar risks associated with DeFi. Its approach is attracting a growing number of users who take out insurance or join the community pool as an underwriter. The latter allows users to earn rewards.

Why did we choose Nexus?

Nexus is helping to solve real problems in the industry, helping protect and reduce risk for investors. The protocol has underwritten over $4.8 billion, over $100 million of which is active cover.

Plus paid out over $18 million in claims from the $277 million capital pool. Impressive numbers. There’s a bright future ahead as the protocol aims to add coverage for real-world risk outside of crypto.

Curve is a specialist stablecoin trading protocol. It allows you to exchange stablecoins like USDC and DAI with minimal slippage and low fees. It leverages the established framework of liquidity pools that reward users for providing funds.

The platform aims to increase the liquidity of stablecoins while retaining high stability during trades. This helps ensure you’re getting the right price on trades as the price doesn’t ‘slip’ much between the time of request and the purchase price at transaction.

Why did we choose Curve?

Stabilizing asset swaps in a volatile market makes Curve an essential protocol. It boasts over $2 billion in value located to the protocol to provide deep liquidity. The Curve ecosystem also provides integrations with other top DeFi protocols including Aave and Compound.

Pendle is where staking and derivatives collide to create a new type of DeFi. It is a yield farming protocol that allows you to trade future yields on your DeFi assets. It spits the ‘yield-bearing’ token into principal tokens and yields tokens. These are then traded in liquidity pools. It essentially means users can earn yield in several ways including speculating on the future.

For example, investors can trade future yields based on market outlook, while sellers can lock in rates to protect against future fluctuations. The Automated Market Maker system even supports assets with time decay – resembling a traditional futures product.

Why Did We Choose Pendle?

We’re always looking for the best DeFi protocols delivering innovation to the space and Pendle certainly does this! It helps to give users more control over future earnings and implement advanced yield management like fixed yield and hedging. This isn’t just an ‘up and comer’ from DeFi either, it boasts over $2.5 billion in locked value on its protocol.

Venus is a top DeFi lending protocol built on the BNB chain. The project was initially a fork of Compound protocol developed by Swipe, a crypto credit card company. The team quickly delegated governance to the native token (XVS) community holders. It combines the stablecoin mining functions of Maker and the algorithmic money markets found on Compound to deliver a unique protocol. Users can lend and borrow in a matter of seconds, earning rewards of up to 20%. To protect lenders, loans are over-collateralized and yields can reach 30% for adding to liquidity pools.

Why did we choose Venus?

Venus combines several tried and tested DeFi features with a wide support of cryptocurrencies. Adding to this, low fees and strong yield rewards make it a top pick. Its over-collateralization and access to stable value assets provide extra security during times of volatility. Its total lock value sits well over a billion dollars too – showing real strength and backing for the protocol.

DeFi protocols are decentralized financial systems built and automated on blockchain technology using smart contracts. They enable peer-to-peer financial transactions without the need for a middleman. Simply put: it removes the need for a ‘centralized’ bank.

The protocols are a set of rules that facilitate decentralized lending, borrowing, trading, interest rates, and similar financial services. As they are built on blockchain, cryptocurrency is essential to the operation. These digital currencies, like Bitcoin and Ethereum, are what people use to transact on in DeFi.

DeFi protocols work using smart contracts on blockchain technology like Ethereum. These smart contracts are governed by a set of rules known as the ‘protocol’. These contracts self-execute based on specific parameters in order to automate financial transactions. This means there’s no third-party company or person in the middle validating everything. 

When you interact with a DeFi protocol, you’re simply engaging with code rather than a traditional bank. This removes human interference, making it ‘trustless’ – there’s no need to ‘trust’ a third party as it’s all automatic.

For instance, if you use a protocol like Aave to borrow money. You start by depositing digital assets as collateral – that’s the security against the loan. Aave then lends you its native cryptocurrency which you can use for other purposes. Plus you can earn interest on your deposit.

DeFi protocols usually have their own cryptocurrency or ‘native token.’ This is used to maintain, govern, and offer benefits to users. So as a holder of these tokens, you can often take part in deciding the future updates to the protocol. The top DeFi protocols all focus on specific functions such as lending, borrowing, exchange/trading, yield farming, or insurance

You’ve seen several of them above, but how do you know which one to use?

Before we go any further in choosing other DeFi protocols, it comes down to two main factors. 

What are you looking to achieve with DeFi

Knowing the type of protocol you’re looking for helps narrow your focus down in the crowded defi space. For instance, are you looking to borrow funds, earn interest, or trade crypto? From here you can then start reviewing options that have those functionalities. 

What does the protocol offer?

Take time to analyze the protocol’s security and transparency. Look at whether it has undergone regular audits and provide clear documentation of its smart contract code. Plus research its history – is it well established with a big community? Has it had protocol failures in the past?  Is it brand new with a minimal user base?

Adding to this, find out if there is a transparent team behind the project. Sometimes this is not always revealed in the pursuit of decentralization. However, after multiple scams and ‘rug pulls’ most projects now have verified teams developing the protocol.

An active community is another green flag. A successful DeFi (decentralized finance) project is reflected in the size of its user base and community. So it should have a very active social media footprint and telegram channels. This shows high demand and chances of longevity in a project.

Tokenomic is one of the most important elements to check. There should be clear guidance on:

• Token distribution
• Inflation rate
• Governance mechanisms
• Incentive structures

You’re likely to be earning or holding the DeFi protocols native token – so make sure it’s solid!

Ready to start using DeFi protocols? Let us show you an example so you can see it in action…. 

Metamask – a popular Ethereum enabled wallet. You might need different wallets for different protocols. For example, Solana DeFi projects work well with Phantom.

Next, buy the required cryptocurrency and deposit it in your wallet. Often, this will be Ethereum, as most DeFi protocols operate on the Ethereum blockchain using either ETH or an ERC-20 token.

Now you can connect your wallet and start transacting on the protocol.

Here’s an example of how to lend crypto using Aave:

1. Visit Aave’s website and launch the app
   
2. Connect your crypto wallet
   
   
3. Select the crypto you’d like to lend
   
   
4. Approve the transaction in your wallet (Always double-check addresses and transaction details before confirming)
   
   
5. Your assets now supply funds and earn interest in the Aave protocol
   
   

You might still be wondering – why use DeFi protocols over traditional financial systems? Well, there’s several benefits: 

Accessibility

It doesn’t matter who you are or where you live. DeFi protocols are permissionless, meaning anyone with an internet connection can access financial services. There’s no irritating bank manager to get around. You don’t even need a bank account or credit check. It’s open to all.

Transparency

All transactions are transparent and automated. The design of blockchain means your transactions can be ‘fiddled’ with, edited, or deleted. It reduces the risk of fraud and manipulation from centralized financial systems.

Efficiency

Removing the middleman also makes life super efficient. Smart contracts automate the execution of financial transactions and agreements instantly. It’s cheaper, operates 24/7, and removes human error as often seen in centralized institutions.

Trustless

No longer do you need to hand your money to a third-party organization like a bank. You can enjoy financial services while remaining in control of your funds. Smart contracts are automated to remove the problem of trust completely from the table.

Yield Opportunity

Every single person on the planet can now become part of the financial ecosystem. That means normal people can earn money or ‘yield’ from their assets. This could be by loaning them out or adding liquidity to an exchange.

Before you go crazy with DeFi protocols, there are several inherent risks you should be aware of to implement effective risk-management techniques. You should do your research and work to mitigate risks such as:

Smart Contract Vulnerabilities

DeFi protocols run on smart contracts. They’re efficient but vulnerable to bugs which could cause them to fail or be exploited by hackers. This can lead to the loss of funds.

Liquidity issues

During times of market volatility or loss of confidence in a protocol, liquidity issues can arise. If there are insufficient liquidity providers you might struggle to execute trades or withdraw funds.

Regulation changes

Regulators are still catching up with the DeFi space. The landscape is still evolving and there is always a risk the regulations impact certain protocol operations.

Impermanent loss

When providing liquidity to AMM protocols like Uniswap you might experience ‘impermanent loss’. This is when the price of assets you deposit changes significantly and reduces the value of your funds.

Governance risks

In an ideal world, DeFi market remain decentralized. But there is always a risk that power becomes concentrated between a small selection of large token holders, making them similar to the traditional financial systems. This effectively leads to centralization and misaligned incentives.

Well, there it is. The top DeFi protocols. The world of traditional financial systems is constantly being challenged by these decentralized applications, transparent alternatives to traditional services. It’s clear that this is an ecosystem thriving on innovation and growth.

From the pioneering MakerDAO to liquid staking ideas like Lido, each of the best DeFi protocols brings unique value to the space. The future of decentralized finance (DeFi) is bright. The accessibility and opportunity for more users to embrace the power of decentralized financial services is truly exciting. Every day, it seems like there’s a new cryptocurrency to buy or a crypto presale!

If you’re just starting to dip your toes in the DeFi waters, just remember it’s important to do your research and only use trustworthy robust protocols.