From Aave to Yearn: What are the blue-chip tokens in DeFi?

This article is from Decrypt, authored by Liam J. Kelly and Robert Stevens, and compiled by Chain Catcher Lesley Liu.
In traditional stock markets, "blue-chip" stocks are well-known stocks that have demonstrated strong financial strength and long-term stable returns, even during downturns. This label is far from technical; it serves more as a subjective recognition symbol in the financial world: these companies are still around, and investing in them is unlikely to go wrong. Think of Amazon, Apple, Nike, and Warren Buffett's Berkshire Hathaway.
In the emerging and rapidly developing DeFi space, Decrypt has identified 8 projects that have nearly achieved blue-chip status within the community. Our criteria include reputation, no hacks, cost-effectiveness, and continuous updates and new features.
DeFi is so trendy that crowning DeFi projects as "blue-chip" may sound crazy.
According to DappRadar, investors have locked over $65 billion in DeFi protocols. Nevertheless, not every DeFi project is equal. Hacks, vulnerabilities, and "rug pulls" have accompanied the rise of the industry, distinguishing cash grabs from blue chips. Investors should proceed with caution, just as they would with any new and volatile asset, only investing what they can afford to lose. Building the future of finance is impossible without a few hacks, crashes, and panics.
Of course, none of these projects have built a brand like Microsoft or Apple, but each has earned a certain level of trust from the DeFi investor community. In the cryptocurrency realm, this is akin to digital gold.
Over time, Decrypt will update our list of blue-chip DeFi tokens.
1. Aave: The Ghost of Finland
Founded: 2017, rebranded to Aave in 2018
Founder: Stani Kulechov
Token: AAVE (previously lent out before 2020)
2021 Price Performance: +104.78%
Aave was previously ETHLend, initially allowing users to earn interest on idle tokens by lending to borrowers. Unlike traditional banks, this activity is also completely transparent on Ethereum. Over the years, Aave has built on this vision by adding new features and even obtaining a payment license in the UK.

As of June 28, 2021, over $10.4 billion was locked in Aave. (Source: DeFi Pulse)
You can earn variable interest rates on over 20 different assets, ranging from common assets to exotic ones. The interest rate varies based on market demand for borrowing the said asset. For example, if a large number of investors want to borrow DAI, the protocol incentivizes lenders to lend DAI by offering attractive rates.
However, borrowing works a bit differently, as the interest rates can be both variable and stable. Nowadays, users borrowing DAI pay an 11.8% stable rate and a 3.61% variable rate, with the stable rate remaining unchanged for a long time. Whether you like it or not, asset lending is a key market in DeFi. For instance, you might be bullish on Ethereum but not want to sell it. Meanwhile, you may want to invest in another project or simply wish to pay bills with crypto dollars or euros.
However, such loans come with risks. If the value of the asset you borrowed (known as collateral) decreases, the protocol can start selling the underlying asset to cover your shortfall. This threshold varies for each asset on Aave. The risk parameters for each asset can be viewed here.
2. Uniswap: The Decentralized Unicorn
Founded: 2018
Founder: Hayden Adams
Token: UNI
2021 Price Performance: +195.44%
Uniswap was founded in 2018 and is the leading decentralized exchange in cryptocurrency, currently holding over 64.7% market share. (Its closest competitor in this category is Sushiswap, a nearly identical fork). Despite the increasing number of decentralized exchanges, Uniswap's dominance has remained for some time. The excellent performance of its governance token UNI has earned the project blue-chip status.

DEX (Decentralized Exchange) market share as of June 28, 2021 (via Dune Analytics)
The UNI token was distributed through a retroactive airdrop in September 2020. Anyone who used Uniswap before the airdrop received 400 UNI tokens, which were worth about $1,400 at the time. The protocol's creator, Hayden Adams, used it as a way to thank the community for their early support of the exchange.
You can swap any Ethereum-based token on the market; if it’s not included in the DEX, you can simply add the token by copying and pasting the smart contract address. After trading, you can also earn by putting idle assets in your wallet into the protocol.
For Uniswap v2, all trades incur a fixed fee of 0.3%. This means that those who add their coins to the exchange, known as liquidity providers, earn a proportional share of the 0.3% fee for each specific token pair traded. Therefore, the most traded pair also generates the most fees. The more you add, the more you earn.
In Uniswap's latest version, v3, this arrangement has been slightly refined. Instead, liquidity providers can choose a fee tier from 0.05%, 0.3%, and 1%. They can also specify a particular price range in which they want to provide liquidity, meaning they can only earn fees when trades occur within that price range.
3. SushiSwap: Developing Dapps
Founded: 2020
Founder: Chef Nomi
Token: SUSHI
2021 Price Performance: +118.39%
SushiSwap emerged in August 2020 as a DeFi application that combines Uniswap with yield farming. Today, it can do most of the same things as other super apps like Aave or Compound: it has a decentralized exchange, a lending market, and a small Dapp network (called "BentoBox"). You can stake its governance token SUSHI and vote on platform upgrades; there’s also a yield farming Dapp called Onsen.
SushiSwap followed the trend of "DeFi summer," naming complex financial protocols after food, and it has emerged as the most successful and least fraudulent company so far. It was created by an anonymous development team led by Chef Nomi and managed by a community manager known as 0xMaxi. Little is known about them, except that 0xMaxi is a very smart young person with a French accent.

As of June 28, 2021, over $2.5 billion was locked in SushiSwap. (Source: DeFi Pulse)
The project was initiated by Chef Nomi, but he ran away last summer, extracting millions from the protocol's treasury. After some twists and turns, he returned to the platform, returned all the money, and was quickly ousted from the development team. 0xMaki became the actual leader of the decentralized protocol, which has been running this way ever since.
SushiSwap is the 9th largest decentralized finance protocol, with smart contracts valued at $2.44 billion, and as more users registered for SUSHI, the SUSHI governance token grew by 108% in 2021.
4. Maker: The Central Bank of DeFi
Founded: 2015
Founder: Rune Christensen
Tokens: MKR, DAI (stablecoin)
2021 Price Performance: +200.93%
Maker is famous for minting the only successful decentralized stablecoin in the market, DAI. Unlike centralized stablecoins like Circle's USDC or Tether (USDT), DAI is backed by over-collateralized loans. Over-collateralized loans refer to loans where the underlying asset exceeds the loan value.
Similar principles apply to Maker. To mint $1 in DAI, users need to deposit $1.5 in ETH. This is because Maker's collateralization ratio is 150%. If the value of the collateral falls below 150% (i.e., $1.5 in ETH becomes $1.4), the protocol will start selling the collateral to repay the borrowed DAI and charge additional fees as a penalty. One of the earliest strategies for speculators was to use Maker and generate leveraged long positions on their ETH bids. After borrowing DAI against their ETH as collateral, they would continue to use the borrowed DAI to buy more ETH, and so on.
Today, the number of assets used for collateral has greatly increased, and the collateralization ratio varies by asset. In April of this year, Maker and centrifuge expanded their business beyond cryptocurrencies, allowing users to use physical real estate as collateral to mint DAI. This move provides a glimpse into a world where traditional finance and cryptocurrency seamlessly merge.
The most valuable aspect of Maker is DAI. However, one concern is the increasing proportion of collateral in Circle's USDC. This is because Circle has ultimate control over the activities of its tokens. In 2020, the company even blacklisted an Ethereum address worth $100,000 in USDC. With over 55.5% of DAI backed by a centralized company, many DeFi purists warn that the scheme may deviate from its original goals.
5. Compound: High-Tech, High-Interest Savings
Founded: 2017
Founder: Robert Leshner
Token: COMP
2021 Price Performance: +60.88%
Like high-interest savings accounts, you can earn interest on various tokens on Compound. The range of tokens is slightly less varied than Aave's, and it also lacks some of the unique features that Aave has built over the past few years.
Compound invented large-scale yield farming (then known as "liquidity mining") in June 2020. IDEX is a decentralized exchange that technically was the first to do so in 2017, but it was a much smaller experiment. On May 27, 2020, Compound announced the launch of its COMP token. After the Compound007 proposal passed, it began distribution on June 15, 2020.
If you borrowed or lent on the platform at that time, you started earning COMP tokens as rewards. For example, you might have earned a 2% yield on your DAI; but during the yield farming activity, you earned that 2% plus COMP tokens proportional to your contribution in a given market.
Theoretically, this activity incentivizes new users to participate and earn governance tokens, effectively decentralizing control over the protocol. That’s because users holding COMP tokens are also eligible to vote on issues like changing the Compound logo or adding new assets.
The protocol remains one of the top five DeFi protocols in terms of total value locked (TVL). TVL is a common metric that measures how much money is "locked" in a given project's smart contracts. As for future developments, Compound Labs is currently building Gateway, a multi-chain version of Compound.

As of June 28, 2021, over $6.6 billion was locked in Compound. (Source: DeFi Pulse)
6. Curve: Decentralized Stablecoin Trading
Founded: 2020
Founder: Michael Ergorov
Token: CRV
2021 Price Performance: +118.39%
Additionally, you can think of Curve as a decentralized exchange optimized for assets with the same relative value. An example of such assets is stablecoins like USDC or Tether. Another example could be various "wrapped" versions of Bitcoin, including WBTC and renBTC.
While these assets aim to maintain the same value, this is not always the case. However, these differences are usually small, equivalent to cents.
Nevertheless, money is money, and many investors want to ensure their money gets the best returns. This is especially true for large stakeholders in such assets.
As trading volumes increase, this number naturally rises, and Curve is often a winner in most cases. Moreover, Curve's trading fees are significantly lower than Uniswap's. As mentioned, Uniswap charges traders a 0.3% fee, while Curve charges 0.04%.
This efficiency improvement is also crucial for those looking to lend idle assets. As previously mentioned, the borrowing interest rates for assets fluctuate based on supply and demand. DAI might yield 3% on Compound, but USDC might yield 7% on Aave. Therefore, it makes the most sense to swap the former for the latter when seeking the highest returns. Using Curve means retaining as much value as possible.
Like Uniswap, Curve also allows users to earn interest by providing liquidity. There is also a Curve governance token called CRV. Holders can use this token to propose and vote on various upgrades or changes to the protocol.
7. Synthetix: Tokenized Stocks
Founded: 2017
Founder: Kain Warwick
Token: SNX
2021 Price Performance: -37.68%
Synthetix allows users to create synthetic versions of traditional assets (like stocks and commodities) on Ethereum. The platform refers to them as "Synths." These synthetic assets track the prices of their mirrored assets using data oracles (specifically Chainlink's). For example, as the price of gold (XAU) rises, the price of synthetic gold (sXAU) also rises. Similarly, as the price of Tesla stock (TSLA) falls, the price of synthetic Tesla stock (sTSLA) also falls.

As of June 28, 2021, the top three Synths on Synthetix. (Source: Synthetix Stats)
Synthetix also allows you to create unique types of assets that may not exist in traditional finance. For example, users can create a synthetic asset that rises or falls in line with a country's gross domestic product (GDP). Similarly, you could create a tool to track the popularity of top crypto influencers, rising as each influencer accumulates more followers.
While these examples do not exist, Synthetix provides a platform to create such assets. Holders of its native token SNX must propose Synthetix Improvement Proposals (SIPs) and have the community vote on the execution of the proposals.
Like all DeFi blue chips on this list, Synthetix's token is also a governance token. However, in addition to voting on SIPs, SNX tokens play a crucial role in the protocol's stability and the health of these synthetic assets.
This is because synthetic Apple stocks, oil, and global currencies are difficult to trade outside the Synthetix ecosystem. For example, the asset sOIL, which tracks oil prices, is not listed on Coinbase. While it can be manually added via smart contract addresses on Uniswap and DEX aggregator 1inch, there is not enough liquidity to execute trades effectively. To purchase them, users must mint the protocol's native stablecoin sUSD. To do this, users must first stake their SNX. This is a mechanism similar to the DAI minting process with Maker.
Staking SNX does bring many incentives. Users holding the token are also eligible to earn fees generated from trading synthetic assets across the entire platform. Currently, this fee is 0.3%. As part of the protocol's inflationary rewards, Stakers also enjoy regular distributions.
Note that this year, SNX tokens have significantly underperformed compared to their blue-chip peers. Some possible reasons for this include the protocol's complexity and increasing competition (for example, Solana is now listing tokenized stocks on its blockchain). Nevertheless, Synthetix remains one of the original DeFi protocols in the field, and many projects have drawn their ideas from it.
8. Yearn: Yield Farming Replicas
Founded: 2020, originally iEarn Finance
Founder: Andre Cronje
Tokens: YFI, WOOFY (unit deviation token)
2021 Price Performance: +19.87%
Yearn Finance launched in 2020 as an aggregator for DeFi yield services, finding the best rates for users without the need to constantly move funds and incur gas costs. This is akin to going to Bankrate to find out which bank offers the highest interest rates for savings accounts. However, you don’t have to choose just one account; you simply deposit your funds into Bankrate, and even if those rates change, the company will automatically select the highest rate.
The biggest difference is that Yearn (like all DeFi) consists of lines of code accessible to anyone with an internet connection, rather than being run by a central bank or equivalent institution. This specific service from Yearn is called "Earn," and it is just one of the few services the project offers.
Unlike aggregated rates, Yearn's "Vaults" have greater flexibility in how they generate returns. For example, if you deposit some Wrapped Bitcoin (WBTC), an ERC-20 token that tracks Bitcoin prices, the Vault will perform various operations to yield a current return of 0.57%.

A set of headlines for multi-step operations being executed by Yearn strategies. (via yearn.fi stats)
Let’s unpack these strategies. The "MakerWBTCDAIDelegate" strategy deposits your WBTC into Maker to mint DAI, then re-deposits this newly minted DAI into another vault called "DAI Vault." The DAI Vault performs various additional operations to earn yield. Once earned, the DAI is converted back to the original deposited asset, WBTC, as the earned interest.

The DAI Vault manages over $50 billion in assets. (via yearn.fi stats)
For finance enthusiasts, Yearn's Vaults operate similarly to hedge funds. Users put in funds, pay fees (currently a 20% performance fee and a 2% management fee), and receive returns. However, hedge funds are known for being black boxes. Yearn Vaults are fully visible on sites like Etherscan.
After Earn and Vaults, there is the Yearn token YFI. This token is distributed through a yield farming mechanism, with only 30,000 tokens in total. Like all other DeFi blue-chip tokens, it is a governance token that allows users to vote on various issues concerning the protocol. These allocations are not reserved for the project’s creator, Andre Cronje. However, unlike other blue chips, YFI is also one of the most expensive tokens, currently valued at nearly one Bitcoin.

Over the past year, the YFI token has surged from $800 to $80,000. (Chart from CoinGecko)