6 Defi Projects to Watch (2022)

December 30, 2021

We list six of our best DeFi picks for 2022. By the end of this article, you'll know the basics of DeFi, some of the most promising projects, and how to get involved.

DeFi? DApps? What do all these letters mean?

DeFi is short for Decentralized Finance. If this area is new to you, check out our DeFi Primer Guide to get a solid scaffolding that will help you stand stronger upon the DApps we discuss in this article. These DApps, or decentralized apps, operate on blockchain or peer-to-peer network of computers, enabling users to engage in transactions direction as opposed to relying on a central authority. Not limited to finance, DApps has uses in gaming, gambling, education, and much more. Let’s start with Uniswap.

”Decentralized finance was in a bear market against ETH the whole year. In particular - DeFi pioneers and cornerstones like Aave, Compound, YFI, Curve DAO and Maker. This was to be expected as they did gain a lot against ETH in the bigger part of 2020. I expect DeFi to make a big comeback in 2022 with improved protocols, new concepts and big improvements in stablecoin yield generation.”
- Andrew Wong, Senior Partner & Portfolio Manager


­­Uniswap, built atop Ethereum's blockchain, is the second-largest cryptocurrency project by global market capitalization. Uniswap is fully decentralized; its lack of monopolized ownership allows it to use a new trading model entitled an automated liquidity protocol.

This protocol incentivizes traders to become Liquidity Providers. These LPs pool their money to fill a fund that is used to execute all trades within the platform. Each token has its own pool and prices, the value of which is determined by a computer-generated mathematic algorithm. Within this system, buyers and sellers needn’t make an appearance in order to make a trade. Rather, they can trade instantly as long as there is enough liquidity in their particular pool to facilitate it. Uniswap is compatible with all ERC-20 tokens and select wallet services such as MetaMask and MyEtherWallet. Uniswap runs on both the Exchange and Factory smart contracts; any ERC-20-based token can be swapped on the newest Uniswap v.2 update.

Uniswap is open source, meaning anyone can copy code to create their own decentralized exchanges (DEXs); traders are even invited to list tokens on the exchange for free. This freedom allows users to maintain control of their funds as opposed to relinquishing control of private keys to centralized exchanges. It also allows for less time and money expended as well as less censorship and mitigated risk of asset loss were the exchange ever to be hacked. As of now, Uniswap is the fourth largest DeFi platform, with more than $3 billion in cryptocurrency assets stored within its protocol.

Uniswap Pros:

Uniswap is a top tier

On its first trading day, UNI was recorded at a volume of $1,762,718,357. This resulted in a market capitalization of $590 million, landing it a spot among the top 10 cryptocurrency exchanges in the world. eToro has been a multi-asset exchange for 15 years. After a thorough, six-month assessment of UNI’s market performance, eToro listed UNI as stable for long-time trading and investing. The conclusion was that the smart contract coding and the non-custodial platform offer control and security. Protected from hackers, traders can stake and swap UNI without fear of outside interference. This endorsement is leading Uniswap to more traders, which will garner more liquidity, more trade volume, and more market capitalization. Additionally, Uniswap’s flat fee of 0.03% is significantly cheaper than much of its competition.

No Verification

Another factor luring additional traders to Uniswap is the lack of verification. Uniswap Exchange does not demand any government-issued identification. The Know-Your-Customer practice employed by centralized exchanges is irrelevant in this decentralized playground. As long as you have sufficient funds and sufficient readiness to buy and/or sell ERC-20 tokens, you can trade whenever and wherever you please.

Effortless Evolution

One positive aspect of digital technology is that it’s relatively easy to retrieve feedback, both quantitatively and qualitatively. Once Uniswap became popular, its hashtags were mentioned all over the internet. Traders took to Twitter (et al) to voice their praises and complaints about this new platform. Uniswap proved it listens to its users and is committed to addressing their concerns. The Uniswap team said they aim to make “Uniswap the most flexible and efficient {automated market maker} ever designed” after their launch of Version 3. This new version allows up to 4,000 times the capital efficiency in respect to Version 2.

Uniswap Cons:

Expensive, relatively

Uniswap offers three fee tiers:

  • 0.05%
  • 0.3%
  • 1%.

These tiers represent the specific risk each liquidity provider is willing to take according to the expected volatility of their pools. For example, stablecoin pairs may charge a 0.05% fee, popular pairs such as ETH/USDT may settle for 0.3%, and pairs with newer tokens may charge a 1% fee. The Uniswap protocol splits these fees proportionally between all existing liquidity providers. Competitor SushiSwap charges a 0.3% fee for all trading pairs where liquidity providers get 0.25% and SUSHI token holders receive the remaining 0.05%. Sushiswap offers a fun, Japanese izakaya experience, but it has been said to clutter the exchange’s interface. Uniswap’s smooth and straightforward app is certainly part of the reason why the exchange has topped the charts of many crypto-curious traders, despite the higher price.

Disbursement, or the lack thereof

There are rumors in the cryptocurrency and blockchain spaces that the team behind the overall project owns 20% to 60% of the valued coins. If this is true, this overwhelming percentage has a swaying say in the future of this technology, and its respective value of it. This wealth hoarding does not bode well for the promise of genuine decentralization and increased control for the masses.


Uniswap runs on the Ethereum network which, by default, means it is beholden to all of its features and smart contracts, including the proof-of-work algorithm. This procedure surely protects from hackers, but it also slows down transactions. Although Ethereum 2.0 has been released with updated algorithms, speeds, and consensus model, Cardano, Tron, Internet Computer, and Binance all still scale faster than Ethereum. As of October of 2021, Ethereum can only process 15 to 30 transactions per second.

Transaction Failures

Transactions have the potential to fail for any of these reasons:

Gas Fee: Your gas fee was too low and did not meet the miner’s requirements.

Maximum Price: You specified a maximum price you are willing to pay for a token, but this price fluctuated during processing.

Insufficient Liquidity: The pool does not have enough funds to pay for your transaction.

How to Invest in Uniswap?

  1. Set up and verify your Binance account
  2. Visit https://uniswap.org
  3. Connect your wallet, deposit funds
  4. Select your tokens
  5. Start trading!


Aave, like its competitor above, also operates top the Ethereum blockchain. Aave also employs smart contracts to manage its assets, but unlike its competitor above, Aave employs a system of contracts rather than a simple symbiosis of two. This way, Aave’s software is managed by a distributed network of computers and its users don’t need to trust an institution or entity to manage their funds. Instead, they need only put their faith in the computer code.

This precious software encourages the creation of lending pools and enables such to be done via 17 different cryptocurrencies. Similar to Ethereum’s other decentralized lending systems, Aave borrowers are required to post collateral before they borrow. In turn, they can only borrow up to the value of the collateral that was posted. Borrowers receive their funds in the form of aTokens, a special, encoded token whose value is pegged to that of another asset. Lenders can receive interest on deposits. Aave also uniquely offers instant flash loans and other variations of issuing debt and credit.

Aave operates via a non-custodial protocol specifically for liquidity providers and borrowers. Simplifying and speeding up the process of lending and earning interest on digital assets, Aave has become a known name for blockchain experts.

Aave Pros:

Large Lending Pool

Aave has some of the largest market sizes and lending pools available in the blockchain universe, putting it ahead of some of its competitors.

Additional Features Surrounding Digital Lending and Borrowing, Stable Interest Rates

For major lending protocols, the interest rate model is simply the relationship between available liquidity in the asset pool and the respective demand to borrow. Aave’s current interest rate model for borrowing stablecoins offers a steady increase until the pool’s utilization ration reaches 80%, after which it will increase sharply. Aave provides stable rates to any prospective borrower, lowering their perceived risk and worry.

Flash Loans

As said on the Aave website, “Flash Loans are the first uncollateralized loan option in DeFi! Designed for developers, Flash Loans enable you to borrow instantly and easily, no collateral needed provided that the liquidity is returned to the pool within one transaction block.”

If this doesn’t happen, the entire transaction is reversed to undo all actions up until that specific point, guaranteeing the safety of the funds within the reserve pool. This innovation revolutionized digital finance.

Aave Cons:

User-Friendliness Has Been Complained About

It’s been said by a percentage of Aave users that the platform is not inherently easy to traverse. For experienced investors who naturally navigate financial platforms with ease, perhaps Aave isn’t problematic. However, part of the appeal of decentralized finance is that it’s luring beginners who don’t have backgrounds or degrees in finance. To empower such a user, Aave may need to revisit its user-friendliness.

Only a Small List of Supported E-Wallets

In this evermore digital age, e-wallets are becoming increasingly relevant. Aave only offers a short list of supported e-wallets (Ledger, BRD, MEW, and Trust), which may limit its user base. If Aave wishes to expand its audience, it may need to open up its virtual doors to more, if not all, wallets.

Flash Loans

Although flash loans were listed in the Pros of Aave, they're also listed in the Cons. Flash loan attacks are a kind of DeFi assault in which a thief takes out a flash loan and then uses it to manipulate the market in their favor. These attacks are becoming increasingly common as they are cheap to pull off and easy to get away with, with already hundreds of millions missing.

How to Invest in Aave?

  1. Set up and verify your Binance account
  2. Connect your wallet, deposit funds
  3. Buy Bitcoin and exchange it for Aave
  4. Start trading!


Yet another Ethereum-based protocol, Synthetix is specifically geared toward the issuance of synthetic assets or “synths,” financial instruments in the form of ERC-20 smart contracts that track and provide returns on an asset without demanding you to hold said asset. Synths can be traded in a number of realms – cryptocurrencies, fiat currencies, indices, inverses, real-world assets – on Kwenta, Synthetix’s DEX. The Synthetix Network Token (SNX) can be used to provide collateral against issued Synths.

Synths operate via decentralized oracles, or smart contract-based price discovery protocols. These are used to track asset prices, also allowing traders to hold and exchange Synths as if they owned the underlying assets. This invites exposure to the assets that are normally inaccessible to the average cryptocurrency investor.

Synthetix Pros:

No Need to Hold Physical Asset, Increased Exposure to Varying Assets, Loyalty

As mentioned above, users don’t actually need to hold the asset they’re trading on Synthetix. Paxos’ PAX Gold is backed by gold bars. Owning PAXG means you own the underlying gold and Paxos is simply holding it for you; alternatively, owning a percentage of Synthetix’s wealth means you don’t own the underlying asset, you simply have exposure to its value.

This bleeds into another positive attribute of Synthetix: not demanding physical ownership paves the way for users to be exposed to new assets that they previously did not have access to. Increased exposure to a lower echelon of traders whose access to valuable assets were often vetoed by other platforms has created a community of empowered traders. If things bode well for this new tier of investors, they will forever be loyal to the platform that granted them the access and therefore money that they’ve earned. Loyalty is key to prolonged business.

Synthetix Cons:

New, Not Guaranteed

While Synthetix is at the forefront of the DeFi movement, the entire system is still in development. Its impressive success at such an infant stage could be indicative of its future success, but it is too early to determine. Only time will tell the story of Synthetix’s success.

Not Fully Decentralized

Synthetix is not fully decentralized, immutable, or censorship-resistant like many other DeFi projects. This was most obvious after the oracle attack that plundered 37 million sETH. After the raid was discovered, Synthetix’s leadership team, spearheaded by Kain Warwick, paused all trading in order to conduct an investigation, showing how monopolized leadership decisions can be made.

How to Invest in Synthetix?

  1. Sign up on the https://www.gate.io/
  2. Register, prove you’re not a robot
  3. Verify your identity
  4. Complete the Know-Your-Client information
  5. Deposit funds
  6. Buy SNX via Limit Order
  7. Sell SNX via Limit Order
  8. Withdraw funds

The DApps above are three very different and prime examples of how traditional finance can be decentralized: an exchange, a bank, an investment firm. The next three DApps below are shifting gears toward more innovative financial platforms. Let’s take a look.

Badger DAO

DAO stands for decentralized autonomous organization, which is exactly what Badger is. Badger DAO was built in response to the blooming fascination with DeFi; it was designed to serve the growing need for bitcoin use within DApps on various blockchain networks and it has certainly delivered on this front. Badger DAO and its BADGER token are arguably the two projects that have accelerated Bitcoin’s involvement in DeFi more than any others.

Badger has two main products. It’s first, Sett Vaults, earns users yield on their synthetic BTC assets. It’s second, Digg, is a software that oversees an elastic-supply cryptocurrency, the DIGG token, that is pegged to the dollar price of bitcoin.

Ethereum-based, Badger is utilized mostly for protocol governance and reward distribution. The coolest aspect of Badger DAO is its focus on community. Anyone with a governance token, a BADGER, can vote on community proposals. The more BADGER someone owns, the more voting power they have. Proposals that garner enough votes are accepted, refined, and put into effect on the mainframe.

Badger DAO Pros:


Mentioned above, users have the ability to craft improvement proposals. With its open-source code, users can encounter a speedbump within the system, suggest a solution, and send it out to other fellow Badger DAO users. This focus on community collaboration and a continuous strive for improvement is what’s earning Badger DAO space in financial headlines. This platform is not only bringing like-minded DeFi fanatics together but also giving them a space to brainstorm and build. This tight-knit family, of sorts, that Badger DAO is nurturing will help sustain it over the long run.


Automation is incorporated to investment strategies played out on Badger DAO. This particular network utilizes Sett Vaults, which can be programmed to seek the highest yields, relinquishing a percentage of the typical workload for farmers and stakers.

Leveling Up

Badger DAO offers a multitude of rewards, competitions, and events. Consistent users can become eligible for Badger Boost. Boost offers more impressive rewards to the users that hold more BADGER, bBADGER, DIGG, and/or bDIGG.

Badger DAO Cons:


Badger DAO’s USP is its community. While that is first on the list of Pros, it could also be the downfall of the platform if leadership isn’t careful. So much of Badger DAO is dependent upon its community members. It relies on its developers and content creators to publish content such as apps, videos, memes, art, etc. Badger DAO needs just as many members to consume this content as it needs members to produce it in order to remain relevant and sustainable.

$120 Million Lost

There are many reasons to trust Badger DAO, but there are also $120 million reasons why not to. In December of this year, Badger DAO reported that $10 million had been pilfered. Yet reports from other blockchain securities and analytics companies pegged the amount closer to over 2,063 bitcoins or nearly $120 million. This wasn’t exactly an attack on the protocol itself; instead, this was an assault on the web interface that connects said protocol to the users’ wallets.

If a plane crashes, the airline will do everything in their power to clean up their act and right their wrongs. This makes another crash from that same airline highly unlikely in the near future. But that doesn’t mean it won’t happen again. Badger DAO is putting in the necessary time and energy to protect their users and regain their reputation, and they’re doing a decent job. Another attack is highly unlikely to happen again in the near future. But that doesn’t mean it won’t happen again.

How to Invest in Badger DAO?

  1. Open an account on an exchange that supports BADGER.
  2. Remember most exchanges require an email address, phone number, and proof of ID to register.
  3. Deposit funds into your account
  4. Fund your account with a bank transfer, credit/debit card, or deposit cryptocurrency from a crypto wallet.
  5. Buy Bagder DAO.

Alpha Homora

Alpha Homora is the brainchild of Alpha Finance Lab, a suite of DeFi products that are designed for automated, interoperable, cross-chain yield-optimization on the Ethereum network. This protocol invites users to leverage yield farming positions and liquidity provision. Governed by one of the successful Binance Launchpad projects, the ALPHA token, the Alpha Homora graphical user interface (GUI) is Hogwarts-themed, sparking the interest of many financially focused Harry Potter fans.

Users borrow ETH and both yield farmers and LPs pay interest rates on ETH, allowing them to have leveraged positions that increase gains. Users can participate in farm pools and there are four main elements within these ecosystems: yield farmers, ETH lenders, bounty hunters, and liquidators.

Alpha Homora Pros:

Innovative Yield Farming

Alpha Homora has unlocked fresh ways to engage in yield farming. Yield Farmers are able to use up to 2.5x leverage to borrow ETH when farming on the supported Uniswap pools. Once a day, all farmed tokens are converted and added to a user’s position. The innovative Auto-Reinvest function helps compound profits earn while automating yield maximization. Alpha Homora reviews argue its users could earn higher APYs without relying on an intermediary; although, Alpha Homora opines it offers the highest APY rates in the market.

Security Audit

There have been numerous DeFi projects that launched without a proper security audit. All Alpha Homora’s smart contracts have been properly audited by renowned blockchain security company, Peckshield.

Synergy for the User

Alpha Homora was designed to be a clean, easy, simply interface for DeFi novices. It’s friendly, magic-filled platform swiftly glides users along its complicated corners. The birth of Alpha Homora out of the already established Alpha Finance Lab gives the project a competitive advantage of sophistication. With the agency’s two-sided problem-solution approach to application development, the entire Alpha brand synergizes itself for the ease of its users.

Alpha Homora Cons:

Liquidation Timing

Yield farmers run the risk of liquidation. Alpha Homora reviews state if users stay above 60% solvency for IndexCoop and 80% solvency for Uniswap, they won’t get liquidated. Additionally, if liquidators don’t liquidate in the specific time range, ETH lenders are then exposed to the debt risks that have been accrued by underwater positions. While this is extremely risky and entirely possible, it has yet to happen. Some say it will never happen while others say it is only a matter of time.


Liquidators and bounty hunters run the risk of being front-run by competitors. If this happens, liquidators and bounty hunters pay gas fees for free, likely at high gas prices. They may get reward bonuses from liquidations or reinvest their bounties.

How to Invest in Alpha Homora?

  1. Open an account on either Binance or Gate.io
  2. Binance is best for users who are operating in Australia, Canada, Singapore, UK, and most of the world.
  3. Gate.io is best for USA users.
  4. Deposit funds into your account
  5. Fund your account with a bank transfer, credit/debit card, or deposit cryptocurrency from a crypto wallet.
  6. Buy Alpha Finance.
  7. Store your Alpha in whatever e-wallet is best for you.


Once known as Matic Network, Polygon is a scaling solution providing tools to quicken the speed, reduce the cost, and simplify the complexities of transactions on blockchain networks. Despite the rebranding, Polygon maintains its MATIC cryptocurrency, which is used as the unit of payment for participants who interact on the Ethereum network. With Ethereum’s growing popularity, it is becoming expensive and time-consuming. Polygon coins itself a layer-2 network, acting as an add-on to Ethereum. It doesn’t change the original blockchain layer, it simply expands its size, security, efficiency, and usefulness.

Polygon Pros:

Independence from Bitcoin

MATIC is what is referred to as an alternate coin (altcoin). Altcoins typically follow the price patterns of Bitcoin during bullish and bearish seasons, which might lead researchers to think the May 2021 crash negatively affected altcoins. While some took a hit, MATIC was not too unfavourably influenced by the 35% price drop of Bitcoin. MATIC was among the few cryptocurrencies that resisted the plummet of BTC and ETH, garnering it much appreciation from DeFi enthusiasts.


As of June 2021, more than 400 DApps are employing Polygon’s infrastructure. These DApps are present in DeFi, NFTs, DAOs, gaming, wallets, oracles, and B2B technologies. This impressive number of partnerships speaks well of Polygon’s ability to assist investors in all sectors.

Polygon also has validation from major players. Famed investor Mark Cuban has invested an undisclosed amount into Polygon. Polygon is also supported by Binance, with Binance launching a Polygon Summer Giveaway for users to share a prize pool of 15,000 MATIC. Additionally, Grayscale, the largest digital asset management firm, announced it has added 13 tokens for potential DeFi investments. Polygon was among those that were listed.

Polygon Works in Tandem with Ethereum

Ethereum has been nicknamed the king of DeFi. According to stateofthedapps.com, there are 3,721 DApps on Ethereum with more than 148,370 daily active users. ETH’s DApps have been involved in over 497,510 transactions in the last 24 hours. Polygon’s inherent tie to Ethereum allows its success to be linked. If Ethereum does well, and all forecasts predict it will, so will Polygon.

Polygon Cons:

Polygon Works in Tandem with Ethereum

Polygon was created as an add-on to Ethereum’s network to improve it in a number of ways, but mostly its speed. While Polygon was successful, Ethereum announced Ethereum 2.0 in December of 2020. This upgrade will transition Ethereum from proof-of-work to proof-of-stake, increasing its transaction to 100,000 transactions per second. This might not only make Polygon less necessary, but it could also affect the price of MATIC.

Polygon Has Copycats

Polygon was such a brilliant idea that it’s genius is now being mimicked by other blockchain technologies such as Polkadot and Chainlink. These projects attempt to make blockchains interoperable while offering the same scalability solutions as Polygon. These could not only render Polygon less relevant, but they could also steal a greater share of the market, lessening Polygon’s share.

How to Invest in Polygon?

  1. Sign up for eToro.
  2. Verify your account by inputting your legal name, email and residential address, phone number, and a government-issued card with your signature embossed on it. This Know-Your-Customer attribute demands a bank statement no more than six months old to help confirm proof of address.
  3. Deposit funds into your account.
  4. This can be done via most credit/debit cards in the currencies of USD, EURO, or GBP.
  5. Navigate the MATIC platform.

The Bottom Line

Can a modern investor become successful without DeFi? Of course. Does that mean modern investors should ignore the increasing prowess of DeFi? Absolutely not. The global financial sector has reached the point of no return. With the impressive invention and rapid innovation of decentralized finance, it is unlikely future economies will be devoid of DeFi. Researching, learning, and understanding what DeFi is and which are the best projects within it can only be beneficial in the years to come. Coinful Capital is excited to share this journey with all of you. Let’s stay tuned together.